Damage Control at the White House
Author: Greg Valliere
April 3, 2019
FOR A PRESIDENT WHO BRAGS ABOUT HIS DEAL-MAKING, this has been a humbling week. He walked back an impulsive call to revive debate over health reform, and now Donald Trump has been checkmated over shutting down the U.S. border.
HERE’S THE DILEMMA TRUMP FACES ON THE BORDER: If he shuts it down, the economic damage — almost immediate job losses — would devastate wide areas of the economy, such as autos, which rely on parts made in Mexico and shipped through the border.
BUT IF TRUMP RELENTS, as his aides and Republican leaders are urging, it will be portrayed as a cave-in, on the heels of his health care capitulation, as Trump once again backs down after making a proposal that was ill-conceived and poorly vetted. As we have repeatedly noted, Trump often plunges into a complicated issue without any clear end-game (see: North Korea).
THE IDEA OF A BORDER CLOSURE has horrified the U.S. Chamber of Commerce and Republican leaders. “Closing down the border would have a potentially catastrophic economic impact on our country, and I would hope we would not be doing that sort of thing,” Senate Majority Leader Mitch McConnell said yesterday. The Wall Street Journal editorial page chimed in this morning: “It’s hard to imagine a more self-destructive decision, and it wouldn’t solve the border asylum crisis in any event.”
IS THERE A PLAN B? Some Trump advisers are weighing a plan that would allow trade — trucks and trains — to continue, while shutting all other areas of the border. And Trump hinted yesterday that he might relent if Democrats begin to negotiate on border security (an unlikely prospect). So now the suspense will build until Friday, when this erratic president visits the border between California and Mexico and announces, perhaps, what he plans to do.
THANKFULLY, THE U.S. FUNDAMENTALS ARE STILL GOOD — and a more important development this morning for the markets is the resumption of trade negotiations in Washington between high-level U.S. and Chinese officials. The Financial Times reported overnight that the talks are still on track, with only a handful of contentious issues still unresolved; an enforcement mechanism hasn’t been agreed upon. We still expect a deal later this spring.
THE PROSPECT OF A TRADE DEAL and the continued monetary accommodation from the Federal Reserve are more important for the markets than the daily tweets, confusion and damage control from the White House. But this Washington background noise is an irritant, and it will get louder in the second half of the year, when an epic budget battle over spending and the debt ceiling will require close monitoring by the markets.
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 Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI is registered as a 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.
