Bah Humbug

by Greg Valliere, AGF Management Ltd.

EVERYONE LOVES A HAPPY ENDING, everyone loves a positive spin. After listening to all the self-congratulatory blather yesterday, we offer a more sober assessment, as follows:

The pandemic: At least one hundred thousand more U.S. fatalities are likely by spring, and more lockdowns loom this winter, here and abroad. The vaccines are a godsend, but it’s not certain how long they will protect people, whether most people can get shots for another four months, or — most importantly — whether 30% of the public will refuse to get vaccinated.

This is the end of the beginning, but not quite the beginning of the end. Self-quarantining will persist for months, as people shy away from airplanes, shopping malls and theaters. Maybe life will return to normal by summer — that’s baked into the markets — but it could take longer.

Joe Biden’s victory: Some congressional Republicans are finally accepting the election results — there was no widespread fraud — but a clear majority of GOP voters will agree with Donald Trump that Biden is an “illegitimate” president. Biden already has to deal with a serious scandal involving his son Hunter, and there’s growing unrest among progressives over his Cabinet picks.

Biden coughed repeatedly in his speech last night, and you can be sure that any sign that he’s sick — or simply has another foot injury — will get disproportionate attention because he’s 78. Biden is a decent guy, but his honeymoon could be brief.

The wimpy virus relief bill: After months of futile talks on a desperately needed package, this is the best they could do? A $748 billion measure is better than nothing, but it apparently will not help state and local governments that will have to lay off thousands of employees. The bill’s aid will expire by spring, before the virus ends.

The geopolitical threats: As the U.S. focuses on other issues, the threat from Russia looks even more serious — Moscow is hacking into the U.S. agencies and firms, while brazenly poisoning dissidents. China is enjoying an economic resurgence, Iran is shifting its nuclear enrichment program to a facility that’s deep underground, and North Korea is itching to test its powerful new missiles.

The Barr departure: No, the Attorney General didn’t resign to spend more time with his family. He resigned because he knows what’s coming in the next month: Trump’s pardons of a rogue’s gallery of shady characters, and intense pressure on the Justice Department to appoint a special counsel to look into the baseless assertions that this fall’s election was rigged.

IT’S NOT ALL BAD: Some positives — The Federal Reserve still has options despite Treasury Secretary Steve Mnuchin’s withdrawal of Fed tools. The economy should improve dramatically in the second half of next year. Trump failed to overturn the election, and his tweets eventually will be ignored.

IT’S ALWAYS DARKEST BEFORE THE DAWN: We get that, but amid all of yesterday’s self-congratulation, we couldn’t help but think that it most definitely isn’t dawn yet.

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.

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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.

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This post was first published at the AGF Perspectives Blog.