A Pelosi Victory? We Don’t Think So

by Greg Valliere, AGF Management Ltd.

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Insights and Market Perspectives

Author: Greg Valliere

August 25, 2021

SOME ANALYSTS DESCRIBED YESTERDAY’S HOUSE VOTE on the two infrastructure bills as a victory for Nancy Pelosi. It was not. She bought a month, until Sept. 27, but there’s still a fatal flaw in the Democrats’ strategy.

THE FLAW, OF COURSE, is the delusional view among House Democrats that they will get to pass a $3.5 trillion bill, loaded with tax hikes, once it has been approved by all Senate Democrats in the reconciliation process. But all Senate Democrats are not in agreement.


1. Passage of the $1.2 trillion infrastructure bill and the $3.5 trillion package of new social spending, partly paid for by major tax hikes. Chances: Zero %.

2. A total breakdown, which was narrowly avoided this week, whereby Pelosi and House progressives refuse to accept half a loaf and reject the $1.2 trillion bill unless it’s accompanied by something close to the $3.5 trillion measure. Chances: 40%.

3. A tortuous deal that enacts the $1.2 trillion package and imposes a major haircut on the other bill, which might spend $2 trillion, possibly less, with watered-down tax hikes. Chances: 60%.

THE PROBLEM FOR DEMOCRATS is that they didn’t do as well as expected in last November’s elections; they simply don’t have enough votes to thwart a few moderate Democrats in both houses. There’s no question that Democratic Sens. Joe Manchin and Kyrstin Sinema will not agree to anything close to a $3.5 trillion bill.

THE HOUSE MODERATES prevailed yesterday with a little-noticed side-deal: Pelosi will not agree to a vote by Sept. 27 if it’s clear that the Senate will not pass the $3.5 trillion bill. Well, it’s clear now and it will be clear next month — even with reconciliation, the Democrats don’t have the votes in the Senate.

WE GET THE ANALOGY that yesterday’s vote moves the ball down the field, but the math won’t change much in the next month. Can Pelosi accept half a loaf or will she reject the $1.2 trillion infrastructure bill unless the Senate agrees to another $3.5 trillion? She stonewalled all of last fall on a Covid aid bill, and she’s likely to stonewall on this as well.

MERCIFULLY, THIS ISSUE WILL FADE for a while as the country focuses on a messy end-game in Afghanistan, needlessly complicated by a line in the sand, Aug. 31 — just as Pelosi has needlessly complicated the infrastructure bills with a Sept. 27 line in the sand.

FOR THE GIDDY MARKETS, seemingly oblivious to any bad news, the risks are rising as Covid cancellations increase, the Federal Reserve begins a late-year tapering, and the expected fiscal stimulus looks a little less likely.

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.

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