by Greg Valliere, AGF Management Ltd.
IT’S TEMPTING TO PREDICT that President Biden’s long slump — which began with the Afghan withdrawal in August — is about to end, as the economy grows and Covid subsides by the end of this winter. But public opinion has turned sharply against Biden, who faces a brutal election in November.
LATEST POLLS SHOW BIDEN’S JOB APPROVAL RATING falling to the mid-40% range, with well over half of the public opposing his handling of the economy and inflation — as his numbers plunge on his handling of Covid. This used to be Biden’s strong suit but Covid now appears to be an albatross as White House messaging on the virus confuses the public.
BIDEN NEEDS A VICTORY, but the Joe Manchin roadblock persists. The West Virginia maverick is not on board as Chuck Schumer attempts to change filibuster rules and move on voting reform, an uphill fight that seems doomed. And negotiations have stalled on the Build Back Better bill, although a deal with Manchin is possible by spring.
A POTENTIAL LIFE PRESERVER for Biden, ironically, could be the Republicans — who may generate a public perception that the GOP has veered too far to the right. In private, an increasing minority of Republicans are exasperated with Donald Trump; they urged him in recent days to cancel a Jan. 6 press conference and, surprisingly, he complied.
THE GOP RIFT IS CLEAR — The party’s establishment, led by Mitch McConnell, wants to move on, but Trump still has an iron grip on the party’s base and wants the next two elections to be a referendum on the 2020 election, which he insists that he won.
TRUMP HAS TO BE CONSIDERED the early favorite to win the 2024 GOP nomination. Moderate Republicans will revolt, led by Maryland Gov. Larry Hogan, former New Jersey Gov. Chris Christie, and Rep. Liz Cheney. If Trump crushes them in primaries, Biden and the Democrats would have an opening to appeal to moderates.
BOTTOM LINE: The biggest political issue in this city is whether Biden runs again; many analysts, including us, believe he will not. It’s a foregone conclusion that the Democrats will lose control of the House this fall; if it’s a landslide, speculation will grow that Biden will not seek another term. His best case scenario is a close finish, as the economy improves after Congress passes a watered-down stimulus bill.
WE THINK THE FALL CONGRESSIONAL ELECTIONS will be fairly close, with a Supreme Court ruling on abortion driving turnout for Democrats. But they face an uphill fight, as Democrats depart Congress in droves and the public concludes that the Biden presidency has not been successful.
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SOME GOOD NEWS: Health officials in London are cautiously reporting that cases of omicron may be peaking in the British capital. Admissions to the city’s hospitals have leveled off, even though the virus is still surging throughout the rest of the U.K.
“FOR THE MOMENT, we can probably say London appears to be over the worst,” a top British health official told ITV’s “Good Morning Britain” on Tuesday. Signs of a peak — especially for young people and those who have booster shots — could arrive in North America by the end of this month, medical experts said yesterday.
THUS IT APPEARS POSSIBLE that the damage to first quarter economic growth could be modest — not sufficient to change the Federal Reserve’s end of asset purchases this spring, with rate hikes beginning before summer. Is the economy over-heating? No — but the labor market is.
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.
