Christmas Grinch Alert — There’s Nothing Under the Tree

by Greg Valliere, AGF Management Ltd.

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December 16, 2021

Christmas Grinch Alert — There’s Nothing Under the Tree
December 16, 2021
BAH HUMBUG !! Democrats hit the wall yesterday, conceding that their $2 trillion-plus social spending bill is virtually dead. Even if Sen. Joe Manchin agrees to a compromise, there’s probably not time to get the Senate version finalized; parts of it have not even been written.

PLAN B seems to be a last-ditch attempt to change the subject — working on a voting reform bill, but the Democrats’ other dissenter, Kyrsten Sinema, indicated that she would not approve any deal that requires changing filibuster rules.

THIS LEAVES PRESIDENT BIDEN perilously close to failing on two of his major legislative goals as the Christmas break begins within a week. The issue has shifted — it isn’t whether these bills can pass before the recess; it’s whether anything can pass when lawmakers return in January.

WE’VE HEARD THE SAME REFRAIN from Chuck Schumer — the Senate is close to passing the Build Back Better bill, and he will pledge to get the package enacted later this winter. But the basic obstacle won’t change next month — Manchin has huge issues with specific provisions, the bill’s cost, and its contribution to inflation.

THIS ISN’T SIMPLY A POLITICAL FIGHT — it potentially will remove fiscal stimulus just as the Fed is taking away the monetary punch bowl, and this will coincide with rising concern about the omicron variant — which may chill traveling, universities and professional sports; the latter may become a major development in coming days.

FAILURE TO PASS BIDEN’S SOCIAL SPENDING BILL jeopardizes the child tax credit, which expired yesterday. Unless there’s a separate bill in the next few days, monthly checks of several hundred dollars per child will not go out in early January, which unquestionably would be an economic headwind.

STILL ANOTHER HEADWIND could come early next year if the White House doesn’t extend the student loan moratorium, which would reimpose payments starting on Feb. 1 that would affect 41 million people.

AS WE WROTE YESTERDAY, Washington has over-done it on the stimulus; could we next over-do it on the restraint just as economic growth may be moderating? Yesterday’s limp retail sales report may have been a warning.

BELEAGUERED JEROME POWELL, who has been behind the curve on inflation, is counting on two shaky premises as the Fed turns hawkish: we’ve turned the corner on Covid, and Congress will provide more stimulus. But neither of those premises are certain, are they?


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.

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This post was first published at the AGF Perspectives Blog.

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