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Four Scenarios as Stimulus Talks Stall

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Insights and Market Perspectives

Four Scenarios as Stimulus Talks Stall

Author: Greg Valliere

July 30, 2020

UNEMPLOYMENT BENEFITS are likely to shrink — still another body blow for an economy that’s weakening as Covid-19 ravages the Sunbelt.

NEGOTIATORS SEEM UTTERLY INCAPABLE of making even minimal progress; perhaps they’ll get a wake-up call from weak economic data — second quarter GDP today, which should be horrible; unemployment next Friday, expected to be soft.

THE FOUR SCENARIOS:

1. Fearing an angry voter backlash, negotiators work overtime and produce a deal by this weekend, which would allow unemployment benefits to continue. Chances: very unlikely.

2. The talks drag well into August, with Congress delaying its Aug. 7 recess and producing a $1.5 trillion bill that puts unemployment benefits on a downward sliding scale, gives some liability protection, aid to state and local governments, $1,200 checks to individuals, more money for small business, and aid for schools. Chances: still the best bet.

3. The talks break down, with no deal in August amid growing market concerns: Chances: can’t rule this out.

4. A short-term extension passes in the next 48 hours, continuing unemployment benefits (at a lower dollar amount) but not much else. No one likes this approach, because it would reduce pressure to get the rest of the deal done. Chances: Unlikely, but “kick the can” is always the easiest option in this town.

THIS IS WASHINGTON AT ITS WORST: It’s all about non-negotiable demands, cynical political calculations, and consulting the opinion polls. The big losers will be millions of Americans who face evictions and bankruptcies.

IF THERE’S NO DEAL, THE RISKS ARE CLEAR: An economic slump would become inevitable, dashing hopes for a decent third quarter. And there would be a fierce voter backlash against incumbents; failure to get a deal would be particularly disastrous for the bickering Republicans — who are on a path toward a tidal wave.


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.

For further information, please visit AGF.com.

©2022 AGF Management Limited. All rights reserved.

Written by

Greg Valliere

Greg Valliere

Chief U.S. Policy Strategist

AGF Investments

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