Two Dramatic Stories as the Week Begins
Author: Greg Valliere
January 27, 2020
HAD IT NOT BEEN FOR THE SHOCKING DEATH of basketball icon Kobe Bryant, the headlines this morning would focus on two dramatic stories — the coronavirus, far from peaking, and the long-awaited book from John Bolton, which apparently will contradict Donald Trump’s version of why aid to Ukraine was frozen.
THERE HAS BEEN VIRTUALLY NO MARKET impact from Robert Mueller, Ukraine, the impeachment trial, etc. But the coronavirus is a growing market concern, as new facts emerge: 2,744 confirmed cases in China, with thousands more likely soon; more than 50 million people quarantined; and an acute shortage of medical supplies in China.
THE NIGHTMARE SCENARIO, suspected but not confirmed by medical experts, is that individuals can be contagious before they display any symptoms. If that’s the case, the number of those infected could rise well above 100,000; there were about 8,000 SARS cases in 2002-03.
1. The Chinese economy could slide even further, as commerce slows; schools are closed and travel is nearly 30% lower for this lunar new year than it was last year.
2. Internal dissent over quarantines and the sluggish initial response from Beijing could further the unrest that has been confined primarily to Hong Kong.
3. China may not be able to keep all of its Phase One trade commitments to the U.S. if its economy continues to falter.
4. If this becomes a worldwide pandemic — unlikely but it can’t be ruled out — it would change market views of the global economy and would raise the possibility that the
Federal Reserve might have to consider rate cuts by spring. At the least, a shaky stock market would drive investors to the safe haven of Treasuries.
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JUST WHEN IT LOOKED LIKE THE IMPEACHMENT BATTLE WAS OVER, with no witnesses being called, a bombshell erupted last night. The New York Times apparently has gotten ahold of the transcript of John Bolton’s book, which he submitted to the White House to examine for security overview. (Who leaked the book? Good question.)
THE BOOK REPORTEDLY contends that Donald Trump demanded a halt in aid to Ukraine unless that country agreed to investigate Joe and Hunter Biden — an apparent quid pro quo. Bolten has reiterated that he’s willing to testify.
SO THE POSSIBILITY OF WITNESSES, which looked unlikely late last week, is now back on the table. There would have to be four Republican defectors who would vote for witnesses, and most observers on Capitol Hill think there are three now — Mitt Romney, Susan Collins, and Lisa Murkowski. One more, possibly retiring Sen. Lamar Alexander or shaky incumbent Sen. Cory Gardner, could defect.
IF THERE ARE WITNESSES, there would be two big implications: the trial could drag well into February (a big negative for Democrats who are running for president), and it could further move the needle on public opinion, which has shifted toward a slight preference for Trump’s removal.
SEVERAL REPUBLICANS are nervous about voting to acquit Trump — they worry about a backlash from voters in moderate states. Nevertheless, the mantra among Republican senators is that whatever witnesses may disclose, Trump is not guilty of high crimes or misdemeanors. Trump is likely win acquittal but, as usual, he will drag down others in the process.
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