by Greg Valliere, AGF Management Ltd.
HIGH STAKES: Congress returns today for three intense weeks of debate on infrastructure, 2022 spending, and the debt ceiling. Our sense is that Democrats will have to scale back their expectations.
FIRST, THE BIGGEST MARKET NEWS this week will come from earnings reports, and on Wednesday and Thursday Jerome Powell testifies before Congress. We think the Fed Chairman will sound relatively dovish, despite high CPI and PPI reports on Tuesday and Wednesday, respectively.
BY THE END OF THIS WEEK the focus in Washington will shift to infrastructure; Senate Majority Leader Chuck Schumer wants to debate two measures on the Senate floor starting next Monday. He’s threatening to keep lawmakers in session next month, denying members some of the usual August recess, but we’ll believe that when we see it.
WE THINK PRESIDENT BIDEN would be happy to take a victory — a $1.2 trillion package for highways, bridges, water, broadband, etc. As for a budget resolution authorizing a second infrastructure bill for huge new social spending, it probably will have to wait until fall for an inevitable haircut. A hike in the debt ceiling also may have to wait until fall.
* * * * *
BIDEN EXECUTIVE ORDERS: Last Friday’s proposals made for dry reading this weekend, but some themes were clear: First, voter anxiety over health care will be a dominant issue in the 2022 election; the Biden proposal targets hearing aid costs, prescription drug prices, hospital price hikes, etc.
Second, many of the proposals are aspirational — the order “encourages” regulatory agencies to foster competition, but actual regulations aren’t imminent and eventually will have to encounter court challenges.
Third, there won’t be imminent moves to break up companies or industries, although new mergers and acquisitions will face rigorous scrutiny as the FTC and other agencies write new antitrust standards.
BOTTOM LINE: There’s no question that headline risks will increase for a wide range of companies, including the tech sector. And there are some widely popular reforms, such as curbs on non-compete clauses. But will these Biden proposals have any immediate impact on corporate earnings? Unlikely — just as a new global minimum corporate tax, not imminent, won’t have a major impact on earnings.
* * * * *
DONALD TRUMP, UNHINGED: There’s an outside chance he could win the 2024 GOP nomination, but winning a general election will be virtually impossible after comments like this: “These were peaceful people, these were great people,” Trump said yesterday, referring to the rioters on Jan. 6.
“THE CROWD was unbelievable and I mentioned the word ‘love,’ the love in the air, I’ve never seen anything like it,” Trump said. He talked about the “spirit and faith and love,” and claimed that “over a million people” were at the rally, not the 100,000 or less who showed up.
JUST AS HE DID IN GEORGIA in January, Trump could drag down the party in 2022. Joe Biden has to worry about inflation, immigration and urban crime, but Trump has lost the center; his support of the rioters is outrageous — an increasing embarrassment for mainstream Republicans.
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.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
For further information, please visit AGF.com.
©2021 AGF Management Limited. All rights reserved.
This post was first published at the AGF Perspectives Blog.
