News : Wake me up when September ends

Tuesday, September 7, 2021

Wake me up when September ends

Sep 07, 2021

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Quick Fix

Wake me up when September ends — Already a rough month with the Afghan withdrawal issues, Covid Delta variant spikes, brutal hurricanes and wild fires and all the rest. Could get nuts in Washington as well with fights over the infrastructure bill and much larger budget measure as well as the need to raise the always-vexing debt limit.

House Democrats remain somewhat coy on how they will handle the $550 billion bipartisan deal and the $3.5 trillion budget reconciliation deal. Lot of moving parts with progressives demanding they proceed together and the $3.5 trillion not get whittled down even though that figure would probably be far too high for Senate moderates.

Then there is the debt limit — Via Pimco's Libby Cantrill, Jerome M. Schneider and Jerry Woytash: "Although the conventional wisdom is that, of course, Congress will raise the debt ceiling — failing to do so would be nearly unthinkable and would hurt Democrats politically — the strategy to do so remains murky at best, which may roil financial markets and could increase the chances of a policy mistake. …

"[I]t appears that Democrats are preparing to pursue a suspension, which would require at least 10 Republican votes to pass in the Senate. The complication is that 46 of the 50 Senate Republicans have indicated they will not vote for any sort of increase"

Compass Point's Isaac Boltansky : "September is set to be an unmitigated mess. We are entering a period of frenetic and muddled legislating encompassing potentially trillions in spending, tax increases, the return of the debt ceiling and a bevy of substantive deadlines at the end of September touching on everything from federal funding to flood insurance.

"Beyond that, the market is eagerly awaiting clarity on the Fed's tapering timeline as well as the White House's plans for the Fed's leadership. Taken together, Capitol Hill has not produced a similar concentration of political risk for the markets since the fiscal wars a decade ago."

GOOD TUESDAY MORNING — Nice to be back in your inbox! We'll get through this brutal month together. 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.

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Driving the Day

President Biden visits Manville, N.J., and Queens, N.Y., to tour Hurricane Ida damage. He could come to MM's neighborhood in Yonkers, N.Y., as well where wrecked cars still litter the streets and people keep cleaning out flooded first floors as best they can …

Delta and the damage done — Pantheon's Ian Shepherdson on the miserable August jobs number: "First, the Delta wave triggered a wobble in restaurant diner numbers, and it started to make people nervous about flying, depressing airline traffic. Then, it pushed down hotel occupancy rates. Finally, it hit the August payroll numbers, hard …

"The Covid-sensitive leisure and hospitality sector reported exactly zero net job gains last month, after averaging 406K over the previous two months. …

"[W]e can't be optimistic. The Delta wave likely is close to peaking, nationally, but people's behavior lags the case numbers by a couple weeks or so, and hiring lags changes in behavior. … We're assuming that the Delta wave will dampen the impact of the reopening of schools, and the ending of the unemployment benefit enhancement, which expired yesterday"

And Goldman Sachs on the hit consumption : "We recently downgraded our Q3 consumption growth forecast to -0.5% annualized to reflect a larger effect of the Delta variant on services spending. Although we expect the Delta setback to be brief, two longer-standing concerns pose challenges for consumption growth over the next few quarters

"First, we have long highlighted that the fiscal impulse will fade sharply from its Q2 peak through end-2022. Fiscal support boosted disposable income to 9% above the pre-pandemic trend on average in 2021H1, but has already dropped off substantially. This decline will weigh on spending, though the impact should be offset by strong gains in labor income"

WHEN WILL IT END??? — Our Joanne Kenen: "There will be no quick and clear turning point ahead in the Covid-19 pandemic, no 'X' to mark on the calendar indicating that the worst is past and we can be confident that going forward there will be fewer cases, fewer deaths, fewer hospitals stuffed to their dangerous limits."

"The deadly surge currently raging in the Southern states may level off, but as the virus recedes in one part of the country, it may explode in another… It seems the narrow window to wipe the coronavirus completely off the face of the globe has slipped through our unvaccinated fingers."

Markets

STOCK FUTURES, OVERSEAS MARKETS RISE — WSJ's Chong Koh Ping and Joe Wallace: "U.S. stock futures and major overseas markets rose Monday in quiet trading, with American stock and bond markets closed for Labor Day. Futures on the S&P 500 ticked up 0.3 percent. The broad stocks gauge on Friday closed out a second week of gains, extending its rally to a series of record highs. Contracts for the Dow Jones Industrial Average also rose 0.2 percent by noon ET. Futures for the technology-focused Nasdaq-100 rose 0.3 percent."

EVENTS THAT COULD SHAKE MARKETS IN SEPTEMBER — Reuters: "After a summer in which stocks have hit a seemingly never-ending run of record highs, September brings a series of monetary and political events that could jolt investors out of their complacency. The will-they-won't-they debate over trimming pandemic-era stimulus gets an airing with several G10 central banks holding meetings. A showdown over U.S. national debt alongside crucial elections in Japan and Germany add to the risks."

Fly Around

UNEMPLOYMENT BENEFITS EXPIRE FOR MILLIONS WITHOUT PUSHBACK FROM BIDEN — NYT's Jim Tankersley and Ben Casselman: "Expanded unemployment benefits that have kept millions of Americans afloat during the pandemic expired on Monday, setting up an abrupt cutoff of assistance to 7.5 million people as the Delta variant rattles the pandemic recovery.

"The end of the aid came without objection from President Biden and his top economic advisers, who have become caught in a political fight over the benefits and are now banking on other federal help and an autumn pickup in hiring to keep vulnerable families from foreclosure and food lines."

DELTA SURGE MEANS THIS IS AS GOOD AS GLOBAL GROWTH GETS — Bloomberg's Enda Curran: "The pandemic's summer resurgence is slowing the global economic recovery as the delta variant dogs efforts to rev up factories, offices and schools. Instead of entering the final months of 2021 confident that the acute phase of the pandemic is over, it's becoming clear that booster shots may be needed for fading vaccines, workplace re-openings will be delayed and border closures remain."

GOLDMAN CUTS U.S. GROWTH FORECAST AS CONSUMER SEES 'HARDER PATH' — Bloomberg's Simon Kennedy: "Goldman Sachs Group Inc. economists revised down their forecast for growth in the U.S. economy this year, pointing to a "harder path" ahead for the American consumer than previously anticipated.

"Overall expansion in 2021 is now seen at 5.7 percent, economist Ronnie Walker wrote in a report to clients on Monday. That compares with an expectation of 6 percent published at the end of August. Walker said the weaker growth will follow through into more of a pickup in 2022. Goldman raised its forecast for that year to 4.6 percent, up from 4.5 percent previously."

BIG EUROPEAN BANKS GET PRODDED ON CLIMATE PROMISES — WSJ's Simon Clark: "Europe's largest banks have pledged to phase out financing carbon dioxide emissions by 2050. But an activist group supported by big shareholders says the lenders aren't doing enough to meet their goals.

"ShareAction, a London-based nonprofit that coordinates investor campaigns to push banks including Barclays PLC and HSBC Holdings PLC on the environmental action, said the lenders are slow to back their commitments with practical steps."

GOLDMAN LINES UP $5B PRIVATE EQUITY ASSET FLOAT — Reuters' Lawrence White and Abhinav Ramnarayan: "Goldman Sachs plans to float the assets of its Petershill Partners unit, hoping to cash in on a private equity boom with an IPO valuing the investment vehicle at more than $5 billion.

"Petershill, which takes minority stakes in alternative assets managers including private equity, venture capital and hedge funds, will be a standalone company operated by the Goldman Sachs Asset Management team, it said on Monday."

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