| | | | | |  | | By Ben White and Aubree Eliza Weaver | Presented by The Great Courses Plus | Editor's Note: Morning Money is a free version of POLITICO Pro Financial Services' morning newsletter, which is delivered to our subscribers each morning at 6 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day's biggest stories. Act on the news with POLITICO Pro. | | | Biden's boom or bust economy — I write this morning about the two roads that President-elect Joe Biden's presidency could go down, depending on vaccine distribution and new stimulus. He could preside over a historic boom or a disappointing bust. The first Covid-19 vaccine began getting to recipients Monday with two more perhaps available by February. But delivering the vaccines to hundreds of millions of Americans — and persuading enough people to take it — will be a massive challenge. Keeping everyone afloat until then requires Congress to provide far more stimulus to a slowing economy slammed by fresh virus breakouts and lockdowns. Stumbles on the vaccine or stimulus fronts could knock the economy and markets back into turmoil, making the incoming president's first year a nightmare. But if the perfect scenario plays out — consistent aid to struggling Americans and businesses, and successful vaccine distribution and adoption — Biden could preside over a remarkable boom in an economy with enormous pent-up demand from Americans desperate to return to their normal lives. The risks of no new stimulus — According to a new analysis from Standard & Poor's Global Ratings coming out Tuesday, the size and timing of fresh stimulus will determine how quickly the U.S. economy can return to where it was before the virus slammed the country in March. Based on average estimates of the boost from stimulus, the U.S. economy would reach its pre-pandemic GDP level by the third quarter of 2021 with a $1 trillion aid package and by the second quarter with a $1.5 trillion package, the report says. But without stimulus, "economic progress drags and GDP does not reach pre-pandemic levels until 2022, if not later." The boom scenario — Via Jim Paulsen, chief investment strategist at The Leuthold Group: "Covid did not create a weak economy as much as it created an even more bifurcated economy ... But all of next year we could grow at 6 percent and that's not pie in the sky. If we do that, or even something like 5.3 percent, we will experience the fastest year of growth in real gross domestic product in over 35 years." GOOD TUESDAY MORNING — Email me on bwhite@politico.com and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on aweaver@politico.com and follow her on Twitter @AubreeEWeaver. | | | | A message from The Great Courses Plus: Don't be stagnant, keep your mind active with The Great Courses Plus . Learn at your own pace with the ability to stream lectures like the Art of Investing anytime, anywhere. Tap into an expansive selection of over 13,000 video streaming lectures from some of the world's greatest minds. Learning should be enjoyable, so start learning today with The Great Courses Plus! | | | | | | WHAT COULD GO WRONG ON THE VACCINES — Via our Joanne Kenen and the amazing POLITICO Nightly team: "Some things will go wrong. That's inevitable in anything as big and complex as an emergency national vaccination drive in the middle of pandemic. Little stuff can be put right. "But a vaccine calamity would be another story. Such a calamity could take many shapes: A logistical morass in delivering millions of temperature-sensitive doses. An unforeseen (and, according to the top scientists who have looked at this, highly unlikely) manufacturing or safety problem." HOPE ON STIMULUS? — Our Burgess Everett and Heather Caygle: "A bipartisan group of senators finally hit paydirt in its long-running coronavirus relief negotiations. And it may provide a pathway to a deal that has eluded Congress for months. "Roughly a dozen centrist senators presented their much-anticipated product … in two pieces: A $748 billion package boosting education, vaccine, transportation and other funding, and a more controversial $160 billion add-on of state and local funding married with a short-term liability shield for employers. "And though it's still not clear what exactly Senate Majority Leader Mitch McConnell and Speaker Nancy Pelosi will do with it, the $748 billion piece was fairly warmly received by Republicans on Monday and Democrats did not immediately dismiss it." GOLDMAN STAYS BULLISH — Via Goldman Sachs analysts: "Our overall economic outlook is firmly positive. The start of vaccine approvals and distribution heightens our confidence in strong global growth in 2021. "Combined with supportive policy and a fresh decline in US real yields, this remains a friendly backdrop for cyclical and risky assets. Our basic orientation is still for a clear pro-cyclical mix: higher equities and commodities, cyclical outperformance within equity markets, steeper curves and a weaker Dollar." FIRST LOOK — Per new U.S. Chamber of Commerce fourth quarter Small Business Index out this a.m.: "Three-quarters (74%) of all small business owners say they need further government assistance to weather the storm. That percentage increases to 81% when looking at minority-owned businesses. … "Only four in 10 (40%) of all small business owners believe their business can continue to operate indefinitely without having to shut down permanently. Veteran- (44%) and minority- (39%) owned businesses are very concerned about the pandemic's impact on their mental health, 16 and 21 percentage points higher than non-minority owned businesses (23%) expressing the same concern." FIRST LOOK II: GENDER GAP AND THE PANDEMIC — Via a new Peterson Institute for International Economics report out today: "Women in the United States, Canada, Japan, and South Korea … experienced a decline in labor force participation, with the gender gap growing around 0.8 percentage point across the four countries from January to September 2020. "In the United States specifically, the gender gap in the workforce was about 0.5 percentage point higher in September than it was in January." | | | | A message from The Great Courses Plus:   | | | | | | STOCKS END MOSTLY LOWER — AP's Stan Choe, Damian J. Troise and Alex Veiga: "Stocks ended mostly lower on Wall Street Monday after an early rally evaporated. In the U.S., investors are waiting to see if Congress can break a logjam on delivering more aid to people, businesses and local governments affected by the coronavirus pandemic, while in Europe talks continue on trying to reach a trade deal between Britain and the European Union. "The S&P 500 slipped 0.4 percent. It was up as much as 0.9 percent earlier. The index is coming off its worst weekly performance since Halloween, and extended its losing streak to four consecutive trading days. Treasury yields rose." WHERE DO COVID-19 VACCINE STOCKS GO FROM HERE? — WSJ: "More than 200 Covid-19 vaccines are in development, but investors have focused on a handful of public companies with products in clinical trials. The race pits pharmaceutical giants against tiny biotechnology firms that have never brought a vaccine to market. From the pandemic's start, little-known biotech companies captured investors' interest. "Many of those stocks soared as the broader market began plummeting in February, and then continued rising amid signs of vaccine progress. This year, shares of Novavax are up 3,038 percent and Moderna is up 702 percent, versus the S&P 500's 13 percent rise, according to FactSet." A FED FAILURE TO DELIVER COULD FINALLY PUSH YIELDS ABOVE ONE PERCENT — Bloomberg's Liz McCormick and Michael Tobin: "The Treasury market's bears may find a dose of vindication this week given that the Federal Reserve may disappoint some traders by not tweaking its bond-buying program, which could finally catapult 10-year yields above 1 percent, even if only briefly. "That psychological mark has proved elusive since March — several attempts to crack through it stalled out quickly as investors anticipating that the Fed will eventually tilt its debt purchases to longer maturities to support the economy used dips in Treasury prices as opportunities to buy." | | | | A message from The Great Courses Plus: Are you an inquisitively curious individual that loves learning? Join a community of life-long learners, and learn more about any topic with The Great Courses Plus. Stream thousands of videos by some of this world's brightest minds. From the Art of Investing to the Theory of Everything, quench your thirst for knowledge with courses designed for the endlessly curious cat. With The Great Courses Plus, you'll enjoy being able to learn anytime, anywhere at your own pace. Now there's nothing keeping you from starting your educational journey. Learn now with The Great Courses Plus! | | | | | | FED TO WEIGH FURTHER OPTIONS FOR AIDING ECONOMY — AP's Christopher Rugaber "The Federal Reserve's policymakers face an unusual conundrum as they meet this week: A short-term economic outlook that is worsening even while the longer-term picture is brightening thanks to the emergence of coronavirus vaccines. "When its meeting concludes Wednesday, the Fed could announce steps to try to offset the pandemic's increasing drag on growth. Or it could choose to mostly watch and wait, for now." A FED FAILURE TO DELIVER COULD FINALLY PUSH YIELDS ABOVE ONE PERCENT — Bloomberg's Liz McCormick and Michael Tobin: "The Treasury market's bears may find a dose of vindication this week given that the Federal Reserve may disappoint some traders by not tweaking its bond-buying program, which could finally catapult 10-year yields above 1 percent, even if only briefly. "That psychological mark has proved elusive since March — several attempts to crack through it stalled out quickly as investors anticipating that the Fed will eventually tilt its debt purchases to longer maturities to support the economy used dips in Treasury prices as opportunities to buy." | | | | BIG SCOOPS IN TRANSITION PLAYBOOK: In the runup to Inauguration Day, president-elect Joe Biden's staffing decisions are sending clear-cut signals about his priorities. What do these signals foretell? Transition Playbook is the definitive guide to one of the most consequential transfers of power in American history. Written for political insiders, this scoop-filled newsletter is breaking big news and analyzing the appointments, people and emerging power centers of the new administration. Track the transition and the first 100 days of the incoming administration. Subscribe today. | | | | | NY FED: EXPECTED HOUSEHOLD SPENDING LEVELS REACH HIGHEST LEVEL SINCE 2016 — WSJ's Michael S. Derby: "Americans' spending expectations are rising, according to a report from the Federal Reserve Bank of New York released Monday. "In its November Survey of Consumer Expectations, the central bank found households reporting the highest level of expected spending growth since July 2016, at a predicted 3.7 percent rise for a year down the road, up from 3.1 percent in October. The increase was driven by households earning under $50,000 a year." SURVEY: CONSUMERS UNCERTAIN ABOUT LABOR MARKET — Reuters: "Americans remained uncertain in November over how they might fare financially as the U.S. economy heals from the coronavirus crisis, with consumers reporting mixed views on the labor market, according to a survey released on Monday by the New York Federal Reserve. "Expectations for earnings growth over the next year remained flat at 2 percent for the fifth straight month. But respondents' views on how spending might change over the next year 'rebounded sharply' to a median 3.7 percent, the New York Fed said." NEW DATA RULES AREN'T THE WHOLE STORY FOR EXCHANGE STOCKS — WSJ's Telis Demos: "The rules are changing for stock exchanges when it comes to market data revenue, but it needn't be a game changer for investors. Exchanges have always fought hard for market share in stock trading, which in turn helps partly determine how much of the collective data fees for the market's Securities Information Processors, or SIPs, go to that exchange. "But the Securities and Exchange Commission on Wednesday adopted rules to open that exclusive data to competition. In theory this threatens SIP revenue for exchanges because market participants may get that data directly or from competing aggregators, analysts have noted." | | | | LISTEN TO POLITICO'S ENERGY PODCAST, SPONSORED BY CHEVRON: Check out our daily five-minute brief for the latest energy and environmental politics and policy news. For must-know stories and candid insights to analysis from POLITICO's 10-person energy team, don't miss out. Subscribe for free and start listening today. | | | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
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