Congress Returns, Crucial Week Ahead; Donald Trump’s Self-Inflicted Wounds
Author: Greg Valliere
July 12, 2021
HIGH STAKES: Congress returns today for three intense weeks of debate on infrastructure, 2022 spending, and the debt ceiling. Our sense is that Democrats will have to scale back their expectations.
FIRST, THE BIGGEST MARKET NEWS this week will come from earnings reports, and on Wednesday and Thursday Jerome Powell testifies before Congress. We think the Fed Chairman will sound relatively dovish, despite high CPI and PPI reports on Tuesday and Wednesday, respectively.
BY THE END OF THIS WEEK the focus in Washington will shift to infrastructure; Senate Majority Leader Chuck Schumer wants to debate two measures on the Senate floor starting next Monday. He’s threatening to keep lawmakers in session next month, denying members some of the usual August recess, but we’ll believe that when we see it.
WE THINK PRESIDENT BIDEN would be happy to take a victory — a $1.2 trillion package for highways, bridges, water, broadband, etc. As for a budget resolution authorizing a second infrastructure bill for huge new social spending, it probably will have to wait until fall for an inevitable haircut. A hike in the debt ceiling also may have to wait until fall.
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BIDEN EXECUTIVE ORDERS: Last Friday’s proposals made for dry reading this weekend, but some themes were clear: First, voter anxiety over health care will be a dominant issue in the 2022 election; the Biden proposal targets hearing aid costs, prescription drug prices, hospital price hikes, etc.
Second, many of the proposals are aspirational — the order “encourages” regulatory agencies to foster competition, but actual regulations aren’t imminent and eventually will have to encounter court challenges.
Third, there won’t be imminent moves to break up companies or industries, although new mergers and acquisitions will face rigorous scrutiny as the FTC and other agencies write new antitrust standards.
BOTTOM LINE: There’s no question that headline risks will increase for a wide range of companies, including the tech sector. And there are some widely popular reforms, such as curbs on non-compete clauses. But will these Biden proposals have any immediate impact on corporate earnings? Unlikely — just as a new global minimum corporate tax, not imminent, won’t have a major impact on earnings.
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DONALD TRUMP, UNHINGED: There’s an outside chance he could win the 2024 GOP nomination, but winning a general election will be virtually impossible after comments like this: “These were peaceful people, these were great people,” Trump said yesterday, referring to the rioters on Jan. 6.
“THE CROWD was unbelievable and I mentioned the word ‘love,’ the love in the air, I’ve never seen anything like it,” Trump said. He talked about the “spirit and faith and love,” and claimed that “over a million people” were at the rally, not the 100,000 or less who showed up.
JUST AS HE DID IN GEORGIA in January, Trump could drag down the party in 2022. Joe Biden has to worry about inflation, immigration and urban crime, but Trump has lost the center; his support of the rioters is outrageous — an increasing embarrassment for mainstream Republicans.
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