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Trade Deception; More Spending; Beto’s Re-do

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Insights and Market Perspectives

Trade Deception; More Spending; Beto’s Re-do

Author: Greg Valliere

May 14, 2019

ANGRY MARKETS: We got some grouchy emails yesterday from readers who essentially had the same complaint: the Trump Administration misled the markets this spring by whispering that a trade deal was imminent — when it most definitely was not. “They were debating whether the signing ceremony would be at Mar-a-Lago or in Hawaii, so of course the markets were upbeat,” one reader wrote, asserting that the markets won’t believe happy spin again.

ANOTHER MONTH OF THIS: President Trump said last night that it will take 3 to 4 weeks before it becomes apparent whether a trade deal can win approval. So that means day after day of the markets over-reacting to Trump tweets, Larry Kudlow TV interviews and Chinese threats. Even more retaliation is coming but we still expect a deal — after a very rocky ride.

LEARNING TO LIVE WITH TARIFFS: Trump calls himself a “tariff guy,” and this may become a permanent feature of the trade landscape — not just tariffs on China but also on Canada, Mexico, Europe, Japan, etc.

WE AGREE WITH TRUMP that China doesn’t play fair and must be confronted, but in the short run this tariff war will reduce the 3% GDP pace down to 2-1/2% or lower. The economy can withstand that, but the markets — which were priced for perfection this spring — feel blindsided.

ONE READER EMAILED US YESTERDAY: “If Trump is going to be a tariff president, fine, it’s clear that he wants to make Americans less likely to purchase imports because they’ll be more expensive. But his desire to fundamentally change trade policy has caught the markets by surprise because the Trump spin had us getting a deal this month.”

SPENDING IS OFF TO THE MOON: Data through the crucial April tax season show that the strong economy has produced a 2% rise in revenues despite massive tax cuts — but spending was alarming. Outlays are 7% higher, with still another new spending goal joining defense, infrastructure, border security, etc. The president and the politicians want to spend more money on space.

WE AGREE WITH TRUMP’S call for $1.6 billion in spending to re-explore the moon, and we definitely agree that Russia and China pose a security threat in space (check out the excellent piece in this past weekend’s Wall Street Journal on the need to spend on space defense). Trump has proposed a 1.4% hike in overall NASA funding, to $21 billion in fiscal 2020 after a large increase this year, and he has a good chance of creating a U.S. space force, a new branch of the military.

THE PROBLEM, AS USUAL, IS FUNDING: Trump wants the private sector to participate, but the details are vague. Republicans want offsets from other parts of the budget, but there’s little likelihood of any cuts; Trump’s call for a 5% haircut for all federal agencies has been largely forgotten. Both literally and figuratively, spending is off to the moon.

THE BETO RE-DO: As we approach two dozen candidates in the Democrats’ presidential race, it’s inevitable that some campaigns will stumble — and none has been more disappointing than Beto O’Rourke’s ragged start. We thought he would fade by fall, but not this fast.

O’ROURKE SAID YESTERDAY that he’s planning on jump-starting his campaign, focusing on issues (that’s a start). Frankly, his only hope is that Joe Biden says or does something disqualifying; that’s the only hope for most of the challengers. We’ll offer our monthly assessment of the pack tomorrow, with O’Rourke barely making the Top Ten.


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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