by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
Author: Greg Valliere
April 2, 2020
LED BY MITCH McCONNELL, Republicans pushed back yesterday on a quick new stimulus package. We still think a measure will pass, but it may not come until June or July.
NANCY PELOSI has called for enacting another bill by late April, but that almost
certainly will not happen; most lawmakers don’t want to set foot in Washington, where virus infections and deaths are climbing rapidly.
NOT SURPRISINGLY, election-year politics are a factor in the next bill. Democrats we’ve talked with think they have Republicans on the defensive — as the virus rages, they will portray McConnell as uncaring, dragging his feet on further aid.
TRUMP NEEDS ANOTHER BILL: Many Democrats note that the president’s polling numbers have leveled off after little bump in March. We’re beginning to think that two hours of TV exposure for Trump every night actually may be doing him no good (a particular lowlight was the appearance of MyPillow guy Steve Lindell at a coronavirus briefing).
SO PELOSI AND CHUCK SCHUMER are going on the offensive for another bill, and Trump gave them an opening by calling for a $2 trillion infrastructure blowout. Treasury Secretary Steve Mnuchin is already talking with Democrats about the next bill.
THE FALLBACK FOR McCONNELL and other reluctant Republicans will be fierce resistance to any provisions that don’t specifically deal with the virus; a Green New Deal plank would infuriate most of the GOP. At the end of the day, Trump will call the shots for the Republicans, and he will “go bold” in a summer bill, especially on infrastructure.
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AN OIL DEAL BY THE END OF THE WEEK? That’s what Trump predicted in his press conference last night, but he has a history of hyperbole; we’re not sure a deal is imminent. Intriguingly, Trump hinted that he could weigh in with a tough response, as the Saudis outrageously have boosted output this week to 12 million barrels per day.
THE SAUDIS ARE A SERIOUS THREAT to producers in Texas and elsewhere. Trump probably will win Texas in November, but that state’s demographics are changing and Beto O’Rourke nearly won a Senate seat there in 2018. Trump can’t win re-election without Texas, so he undoubtedly will offer comfort tomorrow when he meets with major producers, who will plead for some relief.
WE COULD ENVISION A BRASS KNUCKLES CALL from Trump to Saudi Crown Prince Mohammed bin Salman, demanding a cut in production; could Trump threaten sanctions or tariffs? It’s not out of the question, although anything that bold could jeopardize U.S. arms sales to the kingdom.
OUR BOTTOM LINE is that the Saudis and Russia eventually will agree to a modest output cut, but there’s a rich tradition of cheating among oil producers, who often wiggle out of commitments. A modest deal could put a floor under oil prices, but a significant price rise seems unlikely. This is also a demand issue, and demand will be anemic this spring.
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