by Greg Valliere, AGF Management Ltd.
THE STOCK MARKET HAS RALLIED to near-record highs on lots of positive news: no recession, decent earnings, an accommodative Fed, etc. So what’s the next development that could sustain the rally? A trade deal with China, which looks increasingly likely before Christmas.
WE’VE BEEN DOWN THIS ROAD BEFORE, only to stall. But there seems to be a strong desire on both sides to avoid new tariffs on Dec. 15, and intensified talks have led to speculation about where (probably in the U.S.) a phase one deal will be signed by presidents Trump and Xi.
THE HEAVY LIFTING over issues like intellectual property theft will be left to phase two negotiations that could drag on through 2020, but an initial deal — with the likelihood of reduced tariffs — would be a tremendous plus in the U.S. Farm Belt and for American manufacturers. The uncertainty that has gripped both sectors would ease; plans to hire and expand would finally proceed.
CHINA TRADE HAWKS — from Chuck Schumer to Peter Navarro — probably will scoff at a modest phase one deal, but they’re not running for a second term. Trump would boast (regardless of what’s in the pact) that it’s the greatest deal of all time. And the markets soon may have still another
reason not to worry.
* * * * *
NOT PASSING THE SMELL TEST: Elizabeth Warren’s Medicare for All plan immediately hit a wall of criticism — even derision — for its absurd explanations of how to pay for it. Even Saturday Night Live mocked it this weekend, but we recommend the sobering editorial in the Wall Street Journal this morning, which made it clear that Warren can’t credibly pay for it.
THIS MAY GIVE JOE BIDEN the opening he’s been looking for. His aides immediately pounced on the Warren plan, rejecting her assertion that only billionaires would be forced to pay higher taxes. Actually, it contains many higher taxes, including a transaction tax on stock trades.
WE THINK BIDEN’S PLUNGE may have leveled off. He now has an issue — far-left health plans will scare centrist voters in all-important swing districts. Biden’s advocacy of expanding Obamacare may resonate with voters who primarily want a nominee who can defeat Donald Trump (Biden can, and this is still his strongest argument). Of course, Biden has to contend with another moderate, the fast-rising Pete Buttigieg.
OUR SENSE IS THAT MOST DEMOCRATS would be happy to expand on Barack Obama’s Affordable Care Act; the Warren and Bernie Sanders plans have such extreme pricetags — with the threat of higher taxes — that they could become juicy targets. And to complicate Warren’s prospects, Sanders hasn’t gone away; his very loyal base still looks rock-solid, so she will have to fight for his constituents.
IT’S A VERY FLUID field in Iowa, with three months to go before the Feb. 3 caucuses. Is there someone who could emerge from the pack and peak at just the right moment, as Obama did in 2008? Buttigieg has become the insiders’ favorite but maybe he’ll peak too soon, in December. Meanwhile, a very very long shot lurks — a candidate who young people increasingly and passionately support: Andrew Yang, who speaks their language.
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This post was first published at the AGF Perspectives Blog.
