Can Biden and McCarthy Agree on Anything Today?
Author: Greg Valliere
February 1, 2023
WE SUSPECT POWELL IS DISMAYED by an unsubstantiated suspicion in the bond market that the Fed could begin cutting the funds rate by late fall. And why shouldn’t he be frustrated, with the Fed still hiking rates — 25 basis points today and probably another 25 in March.
SO THE PRESS CONFERENCE WILL GIVE POWELL still another opportunity to warn markets that the Fed is still quite hawkish. This should not be a surprise. The Biden-McCarthy meeting may be more interesting, without a clear outcome in sight.
THE FACT THAT THE TWO are already talking on Feb. 1 is encouraging, but there’s absolutely no chance of a deal now. Today’s expectations are modest: Republicans want a commitment from Biden for more talks, although Biden seems resistant to using the word “negotiations.”
BIDEN HAS TWO OBJECTIVES TODAY: He wants assurances from McCarthy that Republicans will not attempt to shut down the government or support a debt default, and he wants the GOP to produce a document listing spending cuts they support.
BOTH OF THESE DEMANDS WILL ENCOUNTER REPUBLICAN RESISTENCE in the House. Hard-line conservatives are not willing to cave — certainly not now — on opposing default. If McCarthy goes rogue and caves, he could be out of a job soon.
AS FOR PRODUCING A LIST of spending cuts, Republicans know they would be roasted by the public if they actually spelled out programs they would kill; that would give Democrats a huge target.
IT’S EARLY IN THIS DEFAULT SAGA, so the most we can expect today is a cordial meeting, a nice photo opportunity and an agreement to talk further. Anything more would be a pleasant surprise.
IF THERE’S ACRIMONY from both sides, threatening a crisis, this could revive a sense of unease in the markets, where investors still believe a default will be avoided this summer. At least the markets have a pretty good idea of where the Fed is headed; it’s the politicians who are preparing to ratchet up the uncertainty.
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.
For further information, please visit AGF.com.
©2023 AGF Management Limited. All rights reserved.
