Glimmer of Hope on Trade; Fed Weighs Inflation Goals; Trump Just Won the GOP Nomination
Author: Greg Valliere
June 3, 2019
AFTER THE DISASTROUS REACTION to still more punitive tariffs from the U.S., could cooler heads prevail this week? There are glimmers of hope this morning as China urges a resumption of talks and a high-level Mexican delegation prepares to visit Washington this week to meet with Secretary of State Mike Pompeo.
DONALD TRUMP WILL SPEND MUCH OF THE WEEK injecting himself into the Brexit dispute and British politics, so it’s unlikely he would sign off on any new approach to China until later this month — ahead of the G-20 summit — or agree to any breakthrough with Mexico; if there’s a deal, he would insist on hosting a splashy event on the White House lawn with the chastened Mexicans. So the most to hope for this week may be a cooling of temperatures.
THE MOOD IN WASHINGTON this past weekend was one of disbelief over the Mexican tariffs, as key advisers Stephen Mnuchin and Robert Lighthizer leaked to the press that they oppose this latest move (Larry Kudlow, laid up with hip replacement surgery, is another likely dissenter). Republicans and business leaders strongly oppose the Mexican move; they’re worried about the impact on the pending USMCA treaty, which now appears to be in limbo.
A CYNICAL VIEW OF THE MARKET REACTION: Trump may realize that this isn’t a bad time to take a market sell-off or an economic speed bump — he’s still got a year-and-a half until the next election. And if the recent turbulence prompts to Fed to cut interest rates, all the better!! A Treasury 10-year bond yield below 2-1/4% is just what Trump wants, and his controversial trade policies may keep rates astonishingly low. Is this a clever plan?
SO HERE COMES THE FED, seemingly always fighting the last battle, convening a high-publicity conference in Chicago on Tuesday and Wednesday, focusing on options for getting maximum employment and a higher inflation rate. Hello — we have maximum employment, and we would argue that much higher tariffs will achieve the inflation goal by later this year, which Trump also may welcome. Trump wants more inflation and rock-bottom interest rates; he believes that’s the magic formula to deal with debt issues.
ONE THING TRUMP WON’T HAVE TO WORRY ABOUT: He essentially won the Republican 2020 nomination this weekend (not that it was in much doubt), when Maryland’s popular GOP Gov. Larry Hogan announced he will not run. We thought Hogan might win a third of the vote in a few states like New Hampshire, but he realized that challenging Trump would be a waste of time and money. Only William Weld, the gadfly former Massachusetts governor, is challenging Trump.
SO AS 23 DEMOCRATS form a circular firing squad — sniping at each other in California this past weekend, arguing over impeachment — Trump will have an uncontested path to the Republican nomination. A contested path often means trouble for an incumbent president, but Trump has an iron grip on his party; most of the 23 Democrats, meanwhile, are eager to please the far left and bash Joe Biden.
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), Highstreet Asset Management Inc. (Highstreet), 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 and Highstreet are registered as 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.
© 2019 AGF Management Limited. All rights reserved.