A Government in Paralysis
Author: Greg Valliere
August 20, 2019
IF YOU TALK WITH PEOPLE IN BOTH PARTIES IN THIS TOWN, a disturbing narrative becomes clear: government policy is ad hoc, subject to change at a minute’s notice, rarely vetted with experts, hamstrung by widespread vacancies in every Cabinet agency. Yesterday offered several examples:
The president, privately fearful that the economy is slipping, is considering tax cuts, the deficit be damned. But by the afternoon, the White House issued a denial that a payroll tax cut is on the table. That’s not quite accurate; an economic contingency plan is taking shape.
The president, who got an earful from business officials last week, finally acknowledges (in private) that the tariff war is hurting the economy, the markets, and consumers. A trial balloon to abandon some of the tariffs was floated yesterday morning, only to die by evening. Will new tariffs against China take effect as scheduled on Sept. 1? No one knows for sure.
An all-out assault on Jerome Powell is coming; the president is convinced he has the authority to oust the Fed Chairman, or at least demote him. There’s nothing Powell can do on Friday at Jackson Hole that would please the president — other than resign, of course.
Background checks on gun purchases, considered likely just a one week ago, apparently have been abandoned by the president in the face of opposition from the right wing and the National Rifle Association. An ill-defined crusade against mental illness is the fallback.
Two of the remaining heavyweights in the Cabinet — Mike Pompeo and Stephen Mnuchin — are thinking of leaving this fall. Pompeo knows that ISIS and the Taliban haven’t been defeated, yet the president wants to disengage. Mnuchin is exasperated on trade, and both are grappling with enormous unfilled vacancies.
The president, to his credit, works the phones constantly, speaking with Republicans, Democrats, business leaders and wealthy backers. They offer conflicting advice, a major reason why the president changes positions so readily; at the end of the day, he only listens to a handful of aides, including Peter Navarro and Ivanka Trump.
Navarro, who is loathed in the markets and the media, has become the face of White House economic policy — eclipsing Larry Kudlow, who reportedly is demoralized. Kudlow has lost the battle on trade, the Fed and the dollar.
Despite the dysfunction, there’s a strong belief in the White House that the president has a good chance of winning re-election; Joe Biden is considered a very shaky opponent. The president is his own press secretary, winning enormous air time on the White House lawn as he comes and goes; he’s merciless toward his opponents, he loves the battle and he has no filter.
WHAT STANDS OUT TO US is a lack of any consistent policy — budget deficits suddenly are fine; the economy is great shape but needs help; dissidents in Hong Kong get little support from a Republican president, etc. This is the most volatile and rudderless climate we’ve ever seen in Washington, and that volatility is now taking hold on Wall Street, where investors increasingly worry about getting blindsided by this exceptionally erratic president.
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), Highstreet Asset Management Inc. (Highstreet), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI and Highstreet are registered as portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. 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.
© 2020 AGF Management Limited. All rights reserved.