by Greg Valliere, AGF Management Ltd.
THE MEDIA IS HAVING A FIELD DAY over the fight between Republicans and Blue Chip businesses like Coca-Cola, Delta Airlines and even baseball — and now Mitch McConnell has bluntly entered the dispute.
THIS REVOLVES AROUND NEW ELECTION LAWS in Georgia and other states. Liberal activists have convinced many businesses that the laws restrict voting, but the Wall Street Journal editorial page and many conservative Republicans say Georgia has actually made it easier to vote. There are two sides to this bitter story.
THE FRICTION ESCALATED this week when McConnell called companies opposing the voting laws “stupid,” and he threatened unspecified “serious consequences” if corporations “become a vehicle for far-left mobs to hijack our country from outside the constitutional order.” But after looking at this high-visibility fight, McConnell’s “serious consequences” look less threatening.
THERE ARE TWO REASONS WHY THIS IS WORTH FOLLOWING:
1. There’s an implicit threat from Republicans that they could drop their opposition to higher taxes on businesses. This probably is a hollow threat, but it’s clear that relations between the GOP and business have soured; even the Chamber of Commerce has become less supportive of Republicans.
2. A populist backlash — and boycotts — may erupt among anti-corporate Donald Trump supporters. During his presidency, Trump frequently bashed Fortune 500 companies, ranging from drug companies to Big Tech. Many companies refused to support Trump’s claims that massive voter fraud denied him a second term, and now he’s seeking revenge.
IN THE FINAL ANALYSIS, the interests of Big Business and most Republicans will continue to intersect; this is a family fight. McConnell’s threats will stir up the Trump base, but our prediction is that this controversy will be a headline risk, with a modest impact on corporate earnings.
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A GLIMMER OF HOPE ON IRAN: Neither side is talking directly to each other this week in Vienna, as intermediaries shuttle back and forth with proposals from U.S. and Iranian officials — but this is a start.
TALKS ARE LIKELY to continue through the end of this week, with little hope for a comprehensive agreement until after the June 18 Iranian elections. Hassan Rouhani, the incumbent president, is ineligible to run for re-election because he has served two terms; relations with the U.S. will be a major issue in the voting.
THERE ARE MANY OBSTACLES: Iran wants all sanctions imposed by the Trump Administration lifted immediately, but the U.S. wants incremental steps. And Iran seems unwilling to show much transparency in its nuclear enrichment program, while the U.S. insists on aggressive inspections.
THE BOTTOM LINE is that Iran may refrain from rocket attacks and other provocations in the Persian Gulf as long as the negotiations continue. If both sides keep talking, the region might enjoy relative calm, and oil prices could soften.
The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.
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This post was first published at the AGF Perspectives Blog.
