The Next Big Scandal; Plus, Strong GDP Report Would Be a Fake-Out
Author: Greg Valliere
January 26, 2023
SOURCES BELIEVE IT’S HIGHLY LIKELY that Donald Trump’s top aides — and possibly Trump himself — will be indicted by the Fulton County DA for a wide range of alleged vote tampering in the 2020 presidential election. The DA said this week that charges are “imminent.”
IT’S VIRTUALLY CERTAIN, legal experts say, that some Trump allies — including Rudy Giuliani — will be indicted, but since Trump was not not one of the 17 people who have been informed that they are targets of the investigation, his indictment is far from certain. Still, the the DA wants the report to remain sealed “because it could hinder future prosecutions.”
TRUMP IS A MASTER at dragging out legal proceedings against him. Even if he’s indicted and convicted, he could use the appeals process to drag this case out for years — all while Trump can claim a “witch hunt” against him.
BUT AN INDICTMENT SURELY WOULD ENERGIZE several Republicans who have all but declared they’re running in 2024; they include Ron DeSantis, Nikki Haley, Mike Pompeo, Mike Pence and Glenn Youngkin, our dark horse to watch. All will argue that it’s time for the GOP to move on; the imminent indictments could reinforce that argument.
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SOME ECONOMIC REPORTS ARE BACKWARD-LOOKING, especially the quarterly GDP data. That may be clear in a few hours, when the Commerce Department releases its initial fourth quarter growth report.
MOST ECONOMISTS EXPECT THE NUMBER will come in at 2.5% or better; the Atlanta Fed is predicting a 3.5% fourth quarter GDP rise. With unemployment at 3.5%, the economy looks deceptively strong.
BUT MORE RECENT DATA shows that the economy is rapidly losing steam; factory data has been particularly weak as firms reduce a fourth quarter inventory overhang and lay off workers. Rising unemployment would begin to erode real disposable income, as consumers defer spending — and the overall economy softens after 425 basis points of Federal Reserve tightening.
THE LIKELIHOOD OF WEAKER GROWTH AHEAD has rapidly changed the consensus at the Fed, which is leaning toward a 25 basis point increase next week, amid growing talk of when the central bankers will pause the rate hikes.
IN DECADES OF FOLLOWING THE FED, we rarely have seen anything like the dramatic split between the Fed’s outlook and the market’s. Fed officials have no intention of cutting rates this year, while many in the markets think rate cuts could begin in the fourth quarter.
COMPLICATING THE FED’S TASK is the possibility that moderate Vice Chair Lael Brainard may be leaving; she’s the frontrunner to become the next head of the National Economic Council, which would make her the Biden Administration’s chief economic policymaker — and the logical choice to eventually replace Janet Yellen, 76, as Treasury Secretary.
BRAINARD HAS BEEN MAKING AN ARGUMENT that it soon may be time to pause and ascertain the impact of Fed rate hikes on the economy. The rate hikes may be over this spring, but the Fed would have to see truly alarming data to even think about a rate cut later this year.
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