Daily Comment (January 13, 2021)

by Bill O’Grady, Thomas Wash, and Patrick Fearon-Hernandez, CFA

[Posted: 9:30 AM EST] | PDF

Our Comment today opens with a brief review of U.S. political and policy news, as momentum builds for the second impeachment of President Trump.  We then review key international developments and, as always, the latest on the coronavirus pandemic and the emerging battles between different vaccines and vaccine protocols. The Asset Allocation Weekly is available.

U.S. Politics:  In a letter to House Speaker Pelosi, Vice President Pence said he would not initiate a proceeding under the 25th Amendment to oust President Trump, as demanded by Democrats to avoid a second impeachment vote against Trump today.  If the impeachment vote is held as planned, the majority of Democrats and many Republicans are expected to support it.  Senate Majority Leader McConnell is reportedly supportive of convicting Trump in the resulting Senate trial.  However, Democrats have said they may want to put off the trial for several months to allow President-Elect Biden to first push through his priority legislative initiatives.  In any case, we still expect investors to generally look through the political noise and ultimately focus again on the positive prospects from mass coronavirus vaccinations and continued monetary and fiscal stimulus.

U.S. Trade Policy:  In her first speech as President-Elect Biden’s nominee to be U.S. Trade Representative, Katherine Tai said the new administration’s trade policy will focus on helping American workers by ensuring trade agreements protect and enhance U.S. jobs, and not just ensure low prices of imported goods for consumers.  Tai said Biden’s policy priorities also include confronting China over its trade practices and enforcing the U.S.-Mexico-Canada Agreement signed by President Trump last year with bipartisan support.

United States-Japan-China:  The outgoing Trump administration yesterday declassified and published its national security strategy for the Indo-Pacific region in an apparent attempt to bind the incoming Biden administration to its tenets and reassure allies of a continued U.S commitment.  Among the key revelations in the document is that Japan and other U.S allies in the region played an outsized role in the plan’s development.  That is consistent with our view that the Biden administration will focus heavily on building a strong alliance to counter China’s malign geopolitical and economic moves in the region.

United States-Cuba:  The Trump administration is putting Cuba back on the list of countries considered state sponsors of terrorism, rescinding a 2015 move by the Obama administration.

United Kingdom:  Even though British stocks remain below their level at the time of the 2016 referendum on Brexit, they continue their post-EU trade deal rebound.  The FTSE 100 benchmark is now up nearly 8% since December 1 in dollar terms, putting it well ahead of the S&P 500, the MSCI World and the Euro Stoxx indexes, despite the U.K. being among the hardest hit by the Covid-19 pandemic.

Russia:  Opposition activist Alexei Navalny said he would return to Russia this weekend despite the Kremlin’s threats to imprison him immediately on what appear to be trumped-up charges.  Navalny has spent the last several months in Germany recovering from poisoning during the summer with a nerve agent he blamed on the Kremlin.  The return of the popular Navalny will put President Putin in a tight political spot.  If he has Navalny arrested, it could inflame opposition passions further.  If he allows Navalny to go free, he will continue his work building opposition to Putin.

Estonia:  Prime Minister Juri Ratas resigned after his Centre Party and its secretary-general were named as suspects in a criminal investigation over a property development in Tallinn, which received a state loan meant for companies hit by the pandemic. Another suspect is an adviser to the minister of finance, who is also head of the far-right Ekre Party.  The scandal threatens to undermine the appeal of right-wing, populist politicians in Estonia and even beyond.

COVID-19:  Official data show confirmed cases have risen to 91,727,510 worldwide, with 1,965,328 deaths.  In the United States, confirmed cases rose to 22,849,962, with 380,821 deaths.  Vaccine doses distributed in the U.S. now total 27,696,150, while the number of people who have received at least their first shot totals 9,327,138.  Finally, here is the interactive chart from the Financial Times that allows you to compare cases and deaths among countries, scaled by population.


 U.S. Policy Response

  • On Thursday, President-Elect Biden plans to detail the first major legislation of his incoming administration:  a massive new stimulus and relief package meant to address the continuing economic fallout from the pandemic.

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