The Fall Outlook — We Handicap Ten Dominant Issues
Author: Greg Valliere
September 3, 2019
CONGRESS IS BACK NEXT WEEK, but the fall effectively has begun — with more uncertainty than in recent memory. Here’s our predictions for ten dominant issues:
1. Trade talks with China will resume but a final deal is unlikely until winter (and could be complicated by the uprising in Hong Kong). The only immediate bright spot on trade this fall: real progress on finalizing a U.S.-Mexico-Canada agreement.
2. The U.S. will not sink into recession despite trade uncertainty among businesses and farmers; cheap gasoline will keep consumers bullish.
3. U.S. fiscal and monetary policies are on steroids; there’s enough stimulus to keep the economy growing at about 2%. Even in Europe, which is bracing for Brexit, fresh stimulus is finally on the table.
4. The Fed will cut rates by 25 basis points later this month, but grumbling will grow this fall among some central bankers, many of whom are reluctant to spend all their ammunition.
5. Donald Trump’s feud with the Fed will persist this fall; he wants much lower rates and a weaker dollar, and may not get either. And he wants Jerome Powell out — or at the least, demoted.
6. Congress faces still another budget snag; final appropriations bills won’t be passed when the new fiscal year begins on Oct. 1, so a “continuing resolution” will drag on until December, with a moderate chance of a shutdown as a heated debate rages over spending more money for a border wall. Other spending, led by defense, will surge.
7. There will be lots of noise on gun control and drug prices — but Congress won’t pass anything. Mitch McConnell will stonewall, despite public demands to act, perhaps jeopardizing GOP prospects in 2020.
8. Joe Biden’s gaffes will be ignored by most voters and he will remain the front-runner for the Democrats’ nomination — provided he performs well in the Sept. 12 debate. Elizabeth Warren will continue to draw huge crowds.
9. Trump faces more investigations but will remain the slight favorite to win re-election. He needs to worry about his job approval rating; if it slips much more (it’s in the low 40s now), he’ll be in real trouble.
10. Equally vulnerable is Canadian Prime Minister Justin Trudeau, still reeling from a scandal. Trudeau faces lackluster challengers in the late October election and is a very slight favorite, thanks to strong support in Ontario and Quebec.
BOTTOM LINE: In looking at the Big Picture, one factor stands out — this is the season for financial market volatility. Will yields continue to plunge? Policymakers need to aggressively confront decelerating economies — and provide some clarity on trade. A sense of urgency would be helpful.
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