Weekly global market focus
Washington politics will dominate market attention this week
Tuesday's Georgia Senate seat run-off elections will determine control of Washington
Markets wait for post-holiday pandemic surgeWeekly global market focus — The U.S. markets this week will focus on (1) the two Georgia Senate seat run-off elections on Tuesday that will determine control of the Senate, (2) any attempt to revive $2,000 stimulus checks, (3) Fedspeak with eight appearances by various Fed officials, (4) the release of the Dec 15-16 FOMC meeting minutes on Wednesday, (5) whether OPEC+ at its monthly meeting today raises its production target for February, and (6) this week’s key U.S. economic data which includes Tuesday’s ISM manufacturing index (expected -1.0 to 56.5) and Friday’s Dec payroll report (expected weak at +50,000).
The European markets will continue to assess the economic fallout from the pandemic surge and whether recent restrictions are successful in curbing the new Covid infection rate. The European markets will also be watching to see if there are disruptions in UK-EU trade even though the two sides reached a post-Brexit trade agreement.
Washington politics will dominate market attention this week — This is a big week for U.S. politics with the two Georgia Senate seat run-off elections on Tuesday and with Congress on Wednesday scheduled to certify the results of the Electoral College vote for Joe Biden as the next president. Inauguration day is in two weeks on January 20. Also, the markets over the next two weeks will be watching for any last-minute actions by President Trump, such as pardons, sanctions, or military action.
The markets will also be watching to see if there is any attempt by President Trump or Democrats to revive the push to boost stimulus checks to $2,000 from $600 despite what appears to be implacable opposition by Senate Majority Leader McConnell. The new session of Congress began yesterday (Sunday) at noon, which means that the House’s previous bill to raise the stimulus checks to $2,000 expired. Any new push for $2,000 stimulus checks would require the newly-seated House to pass a new bill.
Meanwhile, Mr. McConnell has deep-sixed the $2,000 stimulus checks by combining that measure with repealing the liability shield for media companies and the establishment of a commission to investigate President Trump’s claim of massive fraud in November’s election. That 3-prong measure ensured opposition from both Republicans and Democrats and ensured that none of those measures will get anywhere in the Senate.
Tuesday’s Georgia Senate seat run-off elections will determine control of Washington — Tuesday’s run-off elections for the two Georgia Senate seats are of huge importance because they will determine whether Democrats have full control of Washington or whether divided government will continue for at least another two years.
Democrats must win both Georgia Senate seat elections in order to achieve a 50-50 split in the Senate. Vice President-Elect Harris would then cast the tie-breaker vote in favor of the Democrats. In that case, Democrats would have full control of Washington and would be able to pass at least part of the blue-wave agenda.
Even with a 50-50 split in the Senate and a tie-breaker vote by Vice President-Elect Harris, Democrats apparently would still not have enough votes to do away with the Senate filibuster since Democratic Senator Manchin (D-WV) has already said he would not support a vote to eliminate the filibuster. However, Democrats could still pass tax and other legislation through the budget reconciliation process in the Senate, which bypasses the filibuster process and requires only a majority vote in the Senate.
On the other hand, if Republicans win at least one of the Georgia Senate seats, then Republicans will retain their majority control of the Senate. In that case, Senate Majority Leader McConnell would be in the driver’s seat as to whether he allows any of the Biden Administration’s legislative agenda to come up for a vote in the Senate. Mr. McConnell is not likely to be shy about frustrating the Democratic agenda, meaning not much would be likely to get done in the next two years.
The results of Tuesday’s two Georgia Senate seat run-off elections are not expected to be available for possibly a matter of days or even weeks because of slow counting and close races. Also, there will surely be lawsuits and demands for recounts. In the November 3 election, media outlets did not call the Georgia election for Joe Biden for 10 days, and the certification of the results took another week. There were then recounts and lawsuits.
The polls for the two elections remain very tight but have shifted slightly in favor of Democrats in the past several days. The latest poll-of-polls data from FiveThirtyEight shows that Democrat Ossoff is now ahead of Republican Perdue by 49.2-47.4%. In the other race, Democrat Warnock is ahead of Republican Loeffler by 49.5%-47.2%. The betting odds at PredictIt.org, for whatever they are worth, have deteriorated somewhat for Republicans to 60% and have improved for Democrats to 43%.
Markets wait for post-holiday pandemic surge — The markets are waiting to gauge the extent of a new pandemic surge in the wake of holiday travel and gatherings. New U.S. Covid infections on Saturday reached a record high of 299,087, and the 7-day average of new Covid infections vaulted back above the 200,000 mark to 206,450 (still below the mid-December record high of 230,930). The 7-day average of Covid-related deaths was at 2,611 on Saturday, mildly below the mid-December record high of 2,739. U.S. progress on vaccinations is well behind schedule with the U.S. having administered only 4.3 million vaccine doses so far versus the target of 20 million.