This article was penned by CAPIS
Last week, we held our October research call, featuring special guest speakers John Fagan and Brendan Walsh, co-founders of Markets Policy Partners (MPP). MPP is a Washington, D.C.-based independent advisory service that informs clients on matters at the intersection of markets and policy, and in the public sector.
Click here for a video of the research call
MPP’s presentation addressed the following topics:
China Malaise Continues
MPP said China will continue its common prosperity theme and the government will continue to take more control of data and technology. [5:40]
On the Evergrande fiasco, the government will continue to protect retail property investors and quell unrest. [8:25]
Equities in China are “dead money” and better value is to be had elsewhere right now. Chinese markets will start their recovery in 2022 but the journey will not be an easy or pretty process. Overall, the consultancy is not positive on China, however, MPP did note that there are no systemic worries like the 2007 US financial crisis and an implosion of its economy shouldn’t happen. [10:40]
U.S. Inflation Outlook
Recent FOMC minutes are encouraging and support the beginning of the tapering process. [12:10]
Inflation at the moment is driven by supply chain issues and is not similar to the hyperinflationary environment of the ‘70s — the solution to this inflation problem will be unlike other situations. [13:42]
If the Fed uses November to “look at the data” and not make a rate decision it will indicate the core of the Fed is of the transitory inflation perspective. [13:22]
Earnings season is showing companies’ costs have gone up but that they are thus far passing it along to the consumer. [14:04]
As tapering begins and rates climb, companies will face headwinds if they are expanding their workforce to handle the snarled supply chain and distribution issues. This in turn can add inflationary pressure and/or hurt the U.S. economy. [14:40]
Inside the Beltway
President Biden has a lot to worry about if anybody other than Federal Reserve Chairman Powell is nominated due to the increased chance of a partisan battle over other potential candidates’ confirmation. MPP likes Lael Brainard and sees her as likely nominee but she faces uphill battle. [16:00]
MPP says the Biden administration will be successful in passing the Infrastructure and Reconciliation Bills, and the narrative is shifting from the overall dollar amount to the actual deployment and use of the money. Plenty of line items will “fall off the back of the truck” and those social program topics will then become part of 2022 midterm election platforms. [20:02]
The Democrats are more likely to lose control of the House of Representatives in the 2022 midterm elections than the Senate. [25:25]
Miscellaneous Ramblings
Biden still faces headwinds on OPEC’s reluctance to intervene and increase oil production and push oil prices lower. The question remains whether elevated oil prices can derail the U.S. economy. [24:45]
Any future U.S. leader faced with a financial crisis or recession will find it impossible to not look towards the example of COVID stimulus checks as a tool to address consumer confidence or economic worries. [32:55]
ESG investing is a slippery ‘standard’ that is tough to define uniformly. [37:20]
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For questions or to learn more about Markets Policy Partners, please reach out to [email protected] for more updates and insights.
