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All Eyes on California Tonight; Coronavirus Stimulus Options

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All Eyes on California Tonight; Coronavirus Stimulus Options

Author: Greg Valliere

March 3, 2020

WE’RE HEARING THAT BARACK OBAMA was on the phone all day yesterday, urging Democrats to close ranks around Joe Biden — but was it too little, too late? Biden’s prospects may have improved, but he faces two major obstacles:

First is the likelihood that Bernie Sanders will win a massive delegate haul tonight in
California, where Biden’s ground operation has been shockingly lame. Biden may have won some momentum and enthusiasm yesterday, but Sanders has vastly more momentum and enthusiasm in California.

Biden’s second obstacle is Mike Bloomberg, who could drop out after a weak showing tonight, or could stay in the race through the big March 17 primaries, hoping his TV ads are gradually winning him some traction. Our guess is that Bloomberg will drop out tonight or tomorrow.

THE PANIC AMONG THE DEMOCRATS’ ESTABLISHMENT cannot be exaggerated; from Obama on down, they see a Sanders nomination as a disaster — even though, in private, many party leaders express surprisingly strong reservations about Biden’s energy and mental acuity. His running mate, possibly Amy Klobuchar, will be critical.

BUT FIRST BIDEN HAS TO WIN THE NOMINATION, and we’ll wake up tomorrow with Sanders in a clear delegate lead. The party’s establishment desperately wants him out — and they may succeed by July — but the voters may have other ideas, as we’ll see tonight.

* * * * *
TALK IS CHEAP — LET’S SEE THE STIMULUS: Stocks rallied yesterday, reinforcing our view that massive stimulus will make a difference. It’s not as important as a coronavirus vaccine or a peak in new cases — both of which aren’t imminent — but a major jump in stock market psychology will help calm jitters.

SO WHAT’S ON THE TABLE? A Fed rate cut — hopefully coordinated with other countries — is increasingly likely. A 50 basis point move, not 25, is necessary — along with an easing of Fed lending standards. Whether the Fed can afford to wait until the next FOMC meeting, on March 17-18, depends on how the markets perform in the next two weeks.

BEYOND THAT, a massive fiscal response, which is coming in China, will be required virtually everywhere. Washington already is spending money like there’s no tomorrow, so what’s another hundred billion or so?

FIRST, CONGRESS WILL PASS A MODEST BILL, perhaps by the end of this week, for purchases of protective gear, masks, and testing. Passing a bill within a week is remarkable by congressional standards, but the estimated pricetag — $7.5 billion — is far too little. There will have to be more aid to businesses and individuals.

SOME TYPE OF BUSINESS TAX BREAK, maybe emergency aid like tax credits or bridge loans, may be necessary; Italy is already moving in that direction. Individual tax cuts in the U.S. may be on the table, with a chance of passage if they’re temporary. And there’s growing support for a temporary suspension of all tariffs, which would help China as its economy nears a severe recession.

MAYBE STOCKS actually hit bottom last Friday, and the promise of massive stimulus will put a floor under the market. But that’s far from a certain bet because thousands of new infections and deaths loom; the epicenter of this virus will shift from China to Iran, where transparency is nonexistent.


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.

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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©2022 AGF Management Limited. All rights reserved.

Written by

Greg Valliere

Greg Valliere

Chief U.S. Policy Strategist

AGF Investments

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