The In-Between World of Slowdown Rebound

The following is Wednesday’s status check of developments in the US that can influence economic, health and political outcomes, compiled by Mace News:

  • Another day in that indeterminate area between slowdown and rebound, between the alternate universes with President Trump in his evening briefing in his world, the one in which the virus is being controlled, and otherwise, the world of everyone else, where aside from Arizona, more than two dozen hot spot states have high positivity rates. The Washington Nationals play the New York Mets under the lights, synthetic crowd noise orchestrated for the broadcast.

On Capitol Hill, a two-hour negotiating session ended with assurances the talks will go on and the general assumption still being something in the way of relief legislation will be announced Friday or Saturday. What the White House considered a threat, that the president might take executive action on his own if no agreement is reached by the end of the week, is being widely disregarded as hardly a threat. So what if he extends unemployment benefits for a couple of weeks at the current $600 enhanced payment, is the reaction. However the Fox News rumour that he would order the IRS to suspend collection of the payroll tax might cause trouble from both sides of the aisle if he tried it. Treasury’s Mnuchin and the White House’s Meadows seem to have conceded they will go with a $400 enhancement until mid-December. Democrats seemed to have conceded the liability protection against virus lawsuits for business. Less prominent but tall roadblocks are big-dollar issues like the bail-out of multiemployer union pensions.

Democrats seem to have downgraded their demand for Postal Service support by more than half and both sides seem to have narrowed their differences on aid to state and local governments. Mnuchin, Meadows, Schumer and Pelosi met with the suddenly controversial Postmaster General, a Trump donor whom Democrats accuse of sabotaging the delivery of mail-in ballots by restricting overtime. “We told him elections are sacred,” Schumer said.

Back at the White House press room, Trump was asked why he keeps saying mail-in ballots are an invitation to fraud when there is no such evidence. He again endorsed Florida’s mail-ins, which turn out to be vital for Republicans, and renewed his attack on Nevada’s plan to do the same. He was also asked why he keeps saying children are almost immune to the virus and he reverted to once again describing their strong immune systems. Facebook, however, did not agree, taking the drastic step – for the first time – of eliminating one of his posts on children’s supposed immunity because it spread misinformation. Twitter temporarily shut down the Trump 2020 campaign’s account until the same posting is taken down, an unprecedented social media showdown, the Washington Post reported. Continuing to urge schools to welcome students back inside, Trump added another hazard of lockdowns, broken marriages. On Fox, he repeated the virus “will go away” and repeated that in his evening briefing.

The star player on the president’s Corona Virus Task Force, Anthony Fauci, flatly declared the delay in testing results, particularly in a hospital setting where the delay forces personnel to wear PPE, as “absolutely unacceptable” and said he does not know why it continues. Testing turnaround needs to be around 24 hours, not a week. Fauci did an extended webinar for the Harvard School of Public Medicine and vowed to stay on the job as long as he is in top form. He also said that the United States is undeniably the hardest hit country with about 5% of the population and around 25% of the deaths. Twenty-two minute-by-minute tweets from the session are available at @macenewsmacro.

Having said Tuesday the massive Beirut explosion could have been a bomb instead of an industrial accident, Trump Wednesday continued to say the cause could have been an attack despite all signs to the contrary.

  • The private payrolls survey conducted by ADP-Moody’s Analytics flashed a warning sign Wednesday, forecasting far fewer new jobs than expected for Friday’s monthly jobs report on July’s employment situation. President Trump earlier in the week had already said the Friday report would contain a “big number.” Since whatever it shows was derived from a mid-July snapshot, a better indicator of current joblessness might be Thursday morning’s tally of last week’s new claims for unemployment benefits.
  • Other upcoming economic data is the 7:30am ET Challenger count of job cuts. Dallas Federal Reserve Bank President Robert Kaplan speaks at 10a, and will likely repeat his comments Wednesday to CNN, that we’re going to have to learn to manage the disease “through a good part of 2021.” Cleveland Fed President Loretta Mester also spoke Wednesday, saying it remains to be seen whether the economic slowing and the rise in the virus will persist.
  • The Treasury Department held its quarterly refinancing announcement Wednesday morning, with all the numbers about anticipated borrowing and issuance subject to change depending on how much the negotiators end up spending – which has to be covered by Treasury borrowing. The private-sector bond market advisory committee told Treasury that instead of concentrating its increased issuance in shorter maturities, the change in environment now recommends doing the biggest increases in longer maturities, even the 30-year bond. A senior official, answering a question from Mace News, said that if nominal rates low on the yield curve go into negative territory, that Treasury’s revamped auction systems will be able to handle it.
  • Secretary of State Mike Pompeo talked to reporters Wednesday and widened his attack on China social media sites beyond Tic Tok, including We Chat and several others. He also defended soon sending the first Cabinet secretary to visit Taiwan in six years, regardless of the reaction from China.
  • The accumulating declines in the dollar are making more market participants nervous as volatility is replaced by a relentless downward path. The dollar index slipped another 0.14%, now off 0.6% in a week, 4.5% for a month. While the softening is boosting oil and precious metals, some see it as inflation by another name, eroding purchasing power.
  • In US stocks, the Nasdaq achieved No. 31 in its string of record highs, up 0.52% to 10998.40, but for Wednesday alone, was outpaced by the DJIA, which rose 1.39%. While it may not be a new Gilded Age, the era of exuberant stocks against a background of record unemployment might be called the Age of Insouciance as investors seem to be casually indifferent to the world around them – for now. The XRT, the S&P retail benchmark, has surpassed its February high and is approaching its all-time September 2018 high despite the retail industry’s deep, deep distress.

Colin Lambert

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