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.
- Newly confirmed U.S infections topped 215,000 yesterday, marking the eighth straight day in which new infections exceeded 200,000. Hospitalizations related to the virus rose past 131,000, and of those, the number in intensive care rose to almost 24,000.
- The CDC issued an order requiring all international airline passengers, including U.S. citizens returning from abroad, to show proof of a negative COVID-19 test before boarding flights to the country. The order, which will take effect on January 26, and exempts airline crew, military personnel, and passengers under two years old.
- In Japan, the government has expanded its latest pandemic state of emergency to Osaka, Kyoto, Hyogo, Aichi, Gifu, Tochigi, and Fukuoka, making the order effective in 11 of the country’s 47 prefectures. The state of emergency, initially issued on Friday for Tokyo as well as neighboring Kanagawa, Chiba, and Saitama prefectures, is set to expire on February 7.
- In China, the government’s response to the new outbreak near Beijing in Hebei province now includes a stringent lockdown on 23 million people. Authorities want to limit the chances of spreading the virus during the lunar new year vacation period next month. The seven-day national holiday is usually the world’s largest annual mass migration when hundreds of millions of city workers return to their family homes in the provinces.
- Meanwhile, a World Health Organization team will arrive in China on Thursday to investigate the origins of the virus after authorities resolved a series of delays over visa approvals. Beijing has been keen to propagate the narrative that the virus originated outside of China, despite the first mass outbreak occurring in Wuhan.
- A Brazilian medical institute that completed the first Phase III trial of the Chinese CoronaVac vaccine said it was only 50% effective against COVID-19. That still meets the WHO standard for use of the injection, but it was down from a preliminary estimate of 78% issued just last week. The setback is a significant embarrassment for China and will likely undermine its effort to burnish its international image through vaccine diplomacy.
- Iran and Cuba have begun trials of a joint COVID-19 vaccine, as Tehran fights the worst coronavirus outbreak in the Middle East while pledging not to use vaccines from the U.S. and U.K.
- In Australia, several immunologists and the opposition Labor Party today called on the government to reconsider its reliance on the vaccine from Oxford University and AstraZeneca (AZN, 50.29) because of its relatively lower effectiveness compared with the vaccines from Pfizer (PFE, 37.18) and Moderna (MRNA, 124.55).
- In the U.K., Prime Minister Johnson promised to open special vaccine centers that will operate 24 hours a day, seven days a week, “as soon as we can” in an attempt to hit the ambitious target of vaccinating 14 million of the country’s most vulnerable citizens by mid-February.
- In both the U.S. and Europe, the main pharmaceutical lobbying groups have warned against extending the interval between first and second vaccine shots beyond what was tested in clinical trials, despite U.S. and British government decisions to do so to accelerate first shots.
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.