by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
Author: 8
October 28, 2021
New Concern for Joe Biden This Morning — The GDP Report
October 28, 2021
THE THIRD QUARTER WAS A STINKER: The raging Delta variant, supply chain bottlenecks, acute labor shortages, etc. This should produce a soft GDP report this morning, possibly showing growth around 2%.
THIS COULD BE STILL ANOTHER HEADACHE for the reeling Biden Administration, which is bracing for Republican charges that the economy is facing stagflation. We think economic growth will be solid next year, but the narrative today may focus on how weak the economy has gotten after the first half surge.
YIELDS ON THE 10-YEAR TREASURY BOND have fallen significantly in recent days, perhaps anticipating a weak GDP report and growing pessimism over global growth, which is dependent on surging energy prices.
THERE’S LITTLE BIDEN CAN DO: He wants lower energy prices — which would boost consumers’ disposable income — but appealing to OPEC to ramp up production would look ridiculous as global leaders meet at the Glasgow climate summit. Getting an infrastructure deal from Congress — any deal — would help boost consumer confidence.
ACTUALLY, CONFIDENCE IS IN GOOD SHAPE, as Americans see a strong stock market, plentiful jobs and this month’s sharp reduction in Covid cases. But a weak GDP report this morning, combined with persistent inflation, could give the Democrats a fresh anxiety attack; they’re already very worried about Virginia next Tuesday.
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WE HAVE TO AGREE WITH THE WALL STREET JOURNAL editorial this morning — we’ve never seen anything as reckless as the current attempt to pass anything possible to raise taxes. There’s a new trial balloon every day: a wealth tax, a corporate minimum tax, you name it.
NONE OF THESE IDEAS HAVE BEEN VETTED — and many haven’t even been considered by the tax-writing House Ways and Means Committee. So it has come to this: put anything in a tax bill that can raise revenues, then worry about writing the legislative language until later.
PRESIDENT BIDEN WILL TRY ONE MORE TIME this morning to get a “framework” deal that he can take to Europe this evening. But that train has left the station; there will be no final deal today.
THERE ARE HUGE SPENDING AND TAX ISSUES still to be resolved in this embarrassing spectacle despite the happy talk that an agreement is imminent. A final deal by Thanksgiving is a more likely outcome.
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This post was first published at the AGF Perspectives Blog.
