Daily Comment (March 26, 2021)

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

[Posted: 9:30 AM EDT] | PDF

We have published our latest Weekly Geopolitical Report, which constitutes Part II of our series on the geopolitics of Central Bank Digital Currencies (CBDC).  We also have several other recent multimedia offerings.  There is a new chart book recapping the recent changes we made to our Asset Allocation portfolios.  Here is our latest Confluence of Ideas podcast. It’s Friday, and our most recent Asset Allocation Weekly, chart book, and podcast are also available.  (Note: Due to the upcoming Good Friday and Easter holidays, we will not publish an AAW next week; it will resume on April 9.)  Finally, here is our latest Weekly Energy Update.  You can find all this research and more on our website.

Good morning, all! U.S. equity futures are higher this morning as investors are growing more optimistic for a stronger recovery.  We begin with President Biden’s first press conference.  Next, we provide an update on the Suez Canal blockage and give our views on the tech hearing on Capitol Hill.  Our news roundup includes economic and domestic stories, international news, and a virus update.

Biden’s Press Conference: On Thursday, President Biden held his first press conference since taking office. He started with a summary of the administration’s accomplishments and then took questions from reporters. Here are the highlights:

  • The 100 million vaccination goal has already been met, and now the president is aiming for 200 million vaccinations within 100 days of taking office.
  • There is no timeline for the Afghanistan withdrawal. President Biden has stated that he doesn’t expect the troops to withdraw in May but doesn’t think they will be stationed in Afghanistan beyond this year.
  • Biden intends to run for office in 2024 but was unclear when he would formally launch a campaign.
  • Filibuster reform could be taken up if conservatives use it to block voting rights legislation. However, the president was reluctant to commit to supporting its complete removal.
  • Biden also pushed back against criticism that he is the reason immigration has spiked in recent weeks. Several reports implied that immigrants may have been motivated by his nice-guy persona to come to America.  In response, the president attributed the rise in numbers as typical for all presidents, and he erroneously stated that the majority of families attempting to cross the border were immediately sent back.

Out of the items mentioned above, we believe President Biden’s potential run in 2024 is probably the most notable, although not for the reason many would expect.  Despite headlines implying that he has committed to running again, we felt like he was a bit more ambivalent toward the issue.  When asked why he hadn’t formally announced his intention to run again, as his predecessor did, he deflected the question by telling a joke at his predecessor’s expense, stating 2024 isn’t his current focus.  The president’s reluctance to commit to running again could have implications on his agenda going forward.  If conservatives consider him a lame duck, they could ramp up efforts to slow his agenda as they gear up to launch their own challenge in 2024. If we are right, this could mean Biden’s window of getting things done is a lot narrower than we originally thought and could add to the urgency in reforming the filibuster.

Suez Canal Update:  The ship in the Suez Canal remains stuck while specialist dredgers attempt to dig it out.  So far, all efforts to remove the ship have failed, and it is not expected to be removed for at least a week.  Shipping rates have since spiked as vessels have been forced to take a longer route to transport goods.  Additionally, the number of vessels queued up in canals has risen from 186 to 238.  Although this hasn’t led to a rise in oil prices yet, it is expected to happen in the coming weeks.

Tech Congressional Hearing: CEOs from Facebook (FB, $278.74), Twitter (TWTR, $61.20), and Google (Googl, $2,032.46) attended another hearing on Capitol Hill.  The five-hour hearing focused primarily on the January 6 Capitol riots and the role social media had in inciting the riot. As one could have expected, the hearing was quite tense.  Politicians forced CEOs to answer a series of “yes” or “no” questions, at times interrupting when answers went beyond that.  The interruptions were so frequent that Twitter CEO Jack Dorsey sarcastically posted a “yes” or “no” poll on Twitter.  Although it wasn’t clear that any legislation could be made based off the testimony, it does appear there is growing bipartisan support to regulate these social media companies.

U.S. Economic and Domestic Policy:

  • In a bipartisan letter sent Thursday, 41 senators urged President Biden to take action to deter Iran’s nuclear program.  The letter asserted that Iran had accelerated its nuclear activity in “alarming ways,” and urged the Biden administration to use “economic and diplomatic tools” to deter further efforts.
  • A severe tornado outbreak led the National Weather Service to issue a category five warning to southern states Alabama, Mississippi, and Tennessee.  Violent tornadoes are expected to hit major cities such as Jackson, Mississippi, Memphis, Tennessee, and Huntsville, Alabama.  At least three people have already been killed by the tornadoes in Alabama.
  • The Federal Reserve announced on Thursday that buybacks and dividend limits will end for most firms on June 30 after the completion of the most recent round of stress tests. The pandemic-era restrictions were designed to ensure that banks remained healthy enough to continue lending during the pandemic.  That being said, banks will need to maintain capital requirements if they want to resume buybacks and dividend payouts.
  • On Thursday, Congress extended the Paycheck Protection Program for two months.  Both lenders and small business owners were given an additional 30 days to adjust to program changes implemented by the Biden administration.  The changes were designed to help more self-employed people and small business owners take advantage of additional aid provided by the program.
  • The U.S.-U.K. trade deal is expected to miss a deadline needed for it to fast-track through Congress.  The delay is due to the Biden administration’s insistence on a resolution to the Boeing (BA, $247.19)-Airbus (EADSY, $28.55) dispute.  The deal needed to be completed by the end of the month for it to be covered by legislation called the Trade Promotion Authority (TPA).  Missing the deadline could drastically slow down passage as lawmakers will likely attempt to bog down the deal with additional amendments to protect special interest groups such as agriculture.

International Economic News:

  • The election in Israel on Thursday likely extended the parliamentary deadlock as it was unable to produce a clear winner.  The two main blocs, the Likud party and the Yesh Atid party, now need to form a coalition with smaller parties in order to reach the 61 seats needed to form government.  This is the fourth election in two years, and there are doubts regarding whether either side can gain enough support; it seems likely that another election will have to take place.
  • The U.S. and Britain imposed sanctions on two conglomerates in Myanmar following the February 1 coup and crackdown.  The two conglomerates, Myanma Economic Holdings Public Company Ltd. (MEHL) and Myanmar Economic Corporation Ltd. (MEC,), control large sections of the Myanmar economy.  The European Union is also facing pressure to follow suit in issuing sanctions.
  • The Biden administration announced that it would restore humanitarian aid to the Palestinians, along with an additional $15 million to help with the pandemic.  However, the administration made clear that the additional aid will be given to NGOs and not directly to the Palestinian Authority.  The Trump administration had withdrawn aid from Palestine following the decision to boycott the peace meeting in 2018.
  • Canadian Prime Minister Justin Trudeau notched a win in the Supreme Court on Thursday.  The court ruled that because global warming is a national concern, the federal government can set national carbon prices.


  • Western apparel companies have expressed concern over the alleged use of forced labor in Xinjiang.  These companies are now facing boycotts in China as well as a possible ban because of their decision to address the issue publicly.  Following H&M’s (HMRZF, $23.92) decision to no longer source its cotton from Xinjiang, China has effectively erased the clothing store from its online platform.  Nike (NKE, $128.64) and Adidas (ADDF, $310.50) have also faced criticism for their stance against forced labor used to produce cotton.

COVID-19:  Official data show confirmed cases have risen to 124,985,317 worldwide, with 2,746,720 deaths.  In the United States, confirmed cases rose to 30,021,447, with 545,422 deaths.  Vaccine doses delivered in the U.S. now total 169,223,125, while the number of people who have received at least their first shot totals 85,472,166.  Finally, here is the interactive chart from the Financial Times that allows you to compare cases and deaths among countries, scaled by population.


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