What Are the Chances?
Author: Greg Valliere
February 15, 2023
CHANCES OF A LAST-MINUTE DEBT DEAL, avoiding a government default: 60 percent, perhaps too close for comfort as the markets face a crisis this summer.
CHANCES FOR FISCAL RESTRAINT in the final deficit deal: 80 percent, a spending cap has more support than deep cuts in specific programs.
CHANCES OF DEFENSE SPENDING CURBS: 70 percent. Not an actual cut, but a slowing in the rate of increase.
CHANCES THAT SOCIAL SECURITY OR MEDICARE MAY BE CURBED: Zero percent, the safest bet in Washington.
CHANCES OF NEW TAXES TO HELP PAY FOR DEFICIT REDUCTION: 10 percent, but there’s a looming battle coming on extending the Trump tax cuts.
CHANCES OF MORE FED RATE HIKES: 100 percent, after yesterday’s inflation report. How many hikes? At least two, probably three.
CHANCES OF A RECESSION: 40 percent — a recession with unemployment at 3.4 percent seems unlikely any time soon, especially with covid and infrastructure funding still unspent.
CHANCES OF IMMIGRATION REFORM, which could ease the acute labor shortage: 20 percent. There’s no consensus on immigration — even among Republicans.
CHANCES OF LEGISLATION AIMED AT THE CRYPTO CURRENCY INDUSTRY: 60 percent, this is an issue to watch as Elizabeth Warren joins with Republicans to support sweeping curbs.
CHANCES OF GUN CONTROL: Virtually zero. CHANCES OF POLICE REFORM: 40 percent.
CHANCES OF REGULATORY ACTIVISM: 70 percent. An area to watch, as the Federal Trade Commission becomes more activist, and antitrust enforcement becomes a threat for many industries.
CHANCES OF A CRACKDOWN ON BIG TECH: 40 percent. This issue is heating up, but Congress is divided on prescriptions and Silicon Valley has unlimited funds for lobbying.
CHANCES OF A WASHINGTON SHIFT ON ENERGY: 70 percent, as fossil fuels make a comeback and both parties realize that renewables aren’t an imminent solution.
CHANCES OF MORE SANCTIONS AGAINST CHINA: 60 percent. It’s impossible to overstate the antipathy toward China in Washington.
CHANCES OF A UKRAINE TRUCE THIS SPRING: 30 percent. The bloodbath continues, with neither side wanting a compromise.
CHANCES THAT VLADIMIR PUTIN COULD LEAVE OFFICE, either in a coup or for health reasons: 30 percent, a shame because this may be the only plausible way the war can end.
CHANCES THAT JOE BIDEN WILL RUN FOR RE-ELECTION: 70 percent, not a certainty because such an overwhelming percentage of Democrats don’t support him running again.
CHANCES THAT DONALD TRUMP WILL STAY IN THE RACE: 80 percent: Indictments are coming, but Trump will use them as a foil to energize his base.
CHANCES RON DeSANTIS WILL BE THE GOP NOMINEE: 55 percent, not a slam dunk, as Trump’s GOP poll numbers hold up. Wealthy Virginia Gov. Glenn Youngkin has a chance, as does NIkki Haley.
BOTTOM LINE: Until the debt ceiling fight climaxes this summer, the big issues for the markets will be the Fed’s path and the extremely volatile geopolitical climate — two issues that pose downside risks for the markets.
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