Medicine for the Coronavirus? Plus, Bernie is Still the Favorite
Author: Greg Valliere
March 2, 2020
WE WOULDN’T CHANGE MUCH from last Friday’s piece: there are positives amid the market carnage, and the biggest one of all — massive monetary and fiscal stimulus — is now clearly on the table.
IT WOULD BE NAIVE to suggest that the virus has peaked; thousands of more infections are likely. But our sense is that the markets have largely priced in a very grim first half of stagnant economic growth and anemic profits, which will prompt central banks to stimulate aggressively. Because of this stimulus, growth should resume in the second half, which is only four months away.
WE EXPECT A FED FUNDS CUT at the March 18 FOMC meeting of at least 25 basis points, with another reduction by early summer. In addition to the monetary stimulus, the Washington spending binge will continue unabated; a tax cut, unlikely to pass in the House this year, is likely if Donald Trump wins re-election — which still looks likely.
* * * * *
DEMOCRATS ARE FACING A PERFECT STORM: Excuse us for not climbing aboard the Joe Biden bandwagon. He was supposed to win big in South Carolina, and thanks to a key endorsement, he did. Did anyone expect a socialist to carry that state?
NOW THE MEDIA HAS A HORSE RACE, which is fun to follow, but some very cold water is is about to splash Biden tomorrow night in California. He may roughly break even in Texas, North Carolina, Virginia, Massachusetts, etc., but a Bernie blowout is likely in the Golden State, and by Wednesday morning Sanders will have a clear nationwide lead in delegates.
THE BIDEN CAMPAIGN, low on money until yesterday, has an anemic ground game in California; he will struggle to hit 15% of the vote, the threshold for getting delegates. There are 415 delegates at stake in California, and Sanders will win most of them. By week’s end he could lead nationwide by 300-400 delegates, maybe more.
THERE’S STILL A NARROW PATH FOR BIDEN, especially if the vapid technocrat Mike Bloomberg drops out. And there are more primaries to come — the next pivotal date is March 17, when nearly 600 delegates are at stake in Illinois, Florida, Ohio and Arizona, potentially a good day for Biden.
THE GREAT DEBATE AHEAD OF THE MILWAUKEE CONVENTION on July 13-16 is whether a candidate with a plurality of delegates (most likely Sanders) can win the nomination. Or will every non-Sanders delegate hold out for Biden? The super-delegates, mostly party veterans and luminaries, will be pivotal.
SO THIS IS WHY WE THINK THE DEMOCRATS ARE FACING A PERFECT STORM: There are only two likely scenarios: either Sanders winning the nomination, beginning with a romp in delegate-rich California; or there’s bitter trench warfare into the summer, with the party uniting to defeat Sanders — whose loyal base would turn sullen, staying at at home in November.
WHAT DOES THIS MEAN FOR TRUMP? The difference is clear — if Sanders wins the nomination, not only would he lose to Trump, but the Democrats could suffer significant House and Senate losses. If Biden wins the nomination, he’d be the underdog in a brutally negative campaign, but Democrats probably would retain the House.
THUS A BERNIE SURGE THIS WEEK would be market-friendly, a clear plus for Trump. The coronavirus panic adds an element of uncertainty to the November election, but if the economy is pumped up on stimulus by autumn, and if Trump relies on scientists like Dr. Anthony Fauci, a second term for this controversial president still looks like a good bet if he faces Sanders, and a fair bet if Biden somehow wins the nomination.
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.
©2020 AGF Management Limited. All rights reserved.