What Are the Chances? We Handicap the Key Issues

by Greg Valliere, AGF Management Ltd.

Insights and Market Perspectives

WE CANNOT REMEMBER a period when there were more crucial issues than the current stretch. Thereā€™s not enough time to write in detail about every issue, so letā€™s return to an old standby ā€” quickly handicapping the big ones:

UKRAINE: A turning point has arrived (70% chance) but the war isnā€™t over yet as Russia re-groups in the east. After reading several pieces this weekend on the inept Russian military, the outcome of this war seems more likely than ever. Chances that Russia wins: only 30%.

VOLODYMYR ZELENSKY: Chances he can broker a deal later in April: 60%. Chances that Kyiv will remain standing: 80%. Chances that some of eastern Ukraine will fall: 60%. Chances that the Ukrainian people will push back if they donā€™t like the peace treaty: 70%.

TURBULENCE IN MOSCOW: Chances of even more sanctions, prompted by war crimes: 70%. Chances of an ugly Russian purge this spring: 60%. Chances of an economic Depression in Russia: 70%. Chances that Putin will be ousted: 60%. Chances that his replacement will be even more strident: 70%.

THE CHINESE REACTION: Chances that Beijing will move on Taiwan any time soon: suddenly only 30%, The last thing Chinese President Xi needs are crippling sanctions and a bloody war. Chances China will be more outspoken in opposing the Russian invasion: 55%.

CHANCES OF AN IRANIAN NUCLEAR DEAL: 40% and falling. Canā€™t rule it out, but it doesnā€™t seem imminent.

CHANCES THAT JOE BIDENā€™S JOB APPROVAL RATING will soar after a Ukrainian deal: 40%. Inflation is a bigger issue in the U.S.

CHANCES THAT REPUBLICANS WILL TAKE THE HOUSE: 70%. Thereā€™s an outside chance for the Democrats but still another immigration crisis and revelations about Hunter Bidenā€™s deals simply reinforces that this is a Republican year.

CHANCES THAT REPUBLICANS WILL TAKE THE SENATE as well: 52%, and it will stay at roughly 50-50 until November.

CHANCES THAT JOE BIDEN RUNS AGAIN: 40%, we wrote about this last week. Chances that Donald Trump runs: 60%, not the 80% chance that many pundits expect. Chances of a Trump indictment this spring over the Jan. 6 riot: 60%.

CHANCES OF FED RATE HIKES: When the consensus is overwhelmingly in agreement, we worry ā€” but chances of several more rate hikes: 100%. Chances of a 50 basis point rate hike on May 4: 60% and rising.

CHANCES THAT INFLATION WILL SUBSIDE: only 30%, price pressures may moderate a bit but they wonā€™t subside ā€” not with the roaring economy enjoying full employment. Chances the jobless rate falls below 3.5%: perhaps 70%. Chances of a serious global food shortage: 80%.

CHANCES FOR MORE TAX AND SPENDING BILLS: Theyā€™re still alive. Chances of tax hikes on the uber-wealthy: 40%. Chances of tax hikes on highly profitable companies: 55%. Chances of more spending on new social programs: 45%.

CHANCES OF A SIGNIFICANT INCREASE IN DEFENSE SPENDING: Close to 100%, this is a very easy call. A huge hike is coming for ship-building.

CHANCES OF MEANINGFUL DEFICIT REDUCTION: No better than 20%, despite $30 trillion in U.S. debt. But thereā€™s a 70% chance that the pace of spending hikes will begin to slow.

CHANCES THAT CONGRESS WILL LEGALIZE MARIJUANA: only 30% despite strong support in the House. A Senate filibuster against the bill looms.

CHANCES OF STILL ANOTHER DELAY ON RESUMING STUDENT LOAN PAYMENTS: Perhaps 60%, Biden canā€™t afford to lose young voters.

CHANCES OF A REGULATORY CRACKDOWN: Maybe 70%, with financial services firms ā€” including privately held companies ā€” under the gun at the SEC. The threat of a big tech break-up may be exaggerated, but thereā€™s an 80% chance that antitrust enforcement will become even more aggressive.

A HUGE DOMESTIC ISSUE: The great Western drought will get even worse (80% chance), while chances of climate change legislation are close to zero.

CHANCES OF JUDGE KETANJI BROWN JACKSONā€™S CONFIRMATION: At least 80%. Chances that Justice Clarence Thomas will recuse himself from Jan. 6 cases: close to zero.

CHANCES WEā€™VE TRULY TURNED THE CORNER ON COVID: Probably 80%, but itā€™s not 100% because new waves ā€” and new variants ā€” lurk.

FINALLY, DESPITE THIS INCREDIBLE WALL OF WORRY, CHANCES OF A RECESSION this year are only 30%; thereā€™s simply too much stimulus in the system.

 

 

 

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.

This post was first published at the AGF Perspectives Blog.

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