Politics, Policy and The Markets

Glenmede recently hosted “Politics, Policy and Private Markets,” featuring guest speaker Greg Valliere, Chief Global Strategist at AGF of Canada. Glenmede often partners with thought leaders and industry participants to provide additional perspective on topical matters. In this case, Greg’s insights on politics and policy offer a view into the headlines to watch, his outlook heading into the 2020 presidential election and how these issues intersect with the economy.

Greg is a veteran Washington watcher with nearly 40 years’ experience covering political and economic developments. Not only is Greg a Watergate resident, he is also a frequent speaker at conferences, a regular contributor to Barron’s magazine, and a regular guest on CNN, Bloomberg TV and radio, CNBC and Fox TV. In addition to his column for Barron’s, Greg is quoted frequently in The Wall Street Journal and The Washington Post.

We are pleased to share the following outtakes from our discussion:

What is your outlook for the U.S. economy and markets?

I am unabashed of the opinion that market fundamentals look great: there is tame inflation, good earnings, decent GDP and a solid labor market. These fundamentals remain the dominant story. Most importantly, regardless of the daily headlines and tweets, we as investors should focus on the fundamentals, which remain strong.

Which headlines are you keeping an eye on?

There are three areas I’m tracking closely. The first is the deficit. In an economy with a 4 percent unemployment rate and solid fundamentals, the U.S. deficit keeps going up and it should be the other way around. I don’t think it’s going to hurt the economy or drive rates higher, but as we get into the next decade, debt servicing costs may be an issue that could crowd out spending on infrastructure, health care and other initiatives.

The second is Europe: the uncharted waters of Brexit and widespread protests that have rocked France. I thought a revote would maybe make the most sense but I don’t think that’s going to happen. You’ve got that and you’ve got pretty mediocre economic growth in Western Europe.

Lastly, I worry about taxes. I think all of us have to be aware that the Trump tax cuts could be vulnerable as we go into the next decade. The Trump tax cuts are good for 2019 and 2020, but after the next election we may see a Democratic president seeking a big tax increase. That’s been the big subject in the last couple of weeks among the many Democrats who are discussing running for president. I don’t see it as an imminent tax issue for the wealthy, but I do think as we go into the next decade there is going to be pressure to raise taxes.

What is your outlook on the upcoming Presidential Election? 

I spent 2018 stating Trump would win re-election—and the Las Vegas oddsmakers agreed with me. Now I’m beginning to waiver. Barring a health problem, he’s the nominee for certain. 

Some problems for him emerged in the November elections when Republicans fared poorly in Pennsylvania, Ohio, Michigan and Wisconsin. These are the states that essentially propelled Trump to the White House. Secondly, all the exit polls showed a deep antipathy toward Trump among college-educated women. He’s got a problem there and he’s got to improve his standing. Further, in terms of the Special Counsel inquiry, I’ll get to the bottom line: I don’t see the president being ousted…while impeachment in the House is possible, conviction in the Senate is very unlikely where 67 votes are needed and Democrats have only 47 senators. 

On the flip side, the one thing he’s got going for him is the current state of the Democratic nominee field where there are two big issues. 

First, there is a growing rift between moderates and what I call the Bronx Socialists, who have a very ambitious agenda. But then you’ve got people like Bloomberg who may run. Bloomberg is a moderate and within the party the more liberal moderates may say, “He loves Wall Street and we don’t. He wants stop and frisk for the police and we don’t agree.” So the party begins to get pulled between moderate forces and the left. 

Second, many Democratic leaders are aging. Pelosi is 78, her two lieutenants, Steny Hoyer and Jim Clyburn, are 79, Bernie is 77, Biden is 76 and Bloomberg is 76, [and] you’ve got Dianne Feinstein who is 85. But there is a need in the party—and they acknowledged this in private—for some fresh blood. Hence the great, almost irrational passion for Beto O’Rourke of Texas who could do quite well. He’s got great teeth, he’s young, he’s got some pizzazz. 

So the party has some growing pains to go between the young, old, left and right. So that could be a plus for Trump, but I’d say his chances of re-election, his chances of getting 270 votes have slipped a bit and at this point, I think it’s going to be a close race for him. 


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The views and opinions expressed in this article are those of the persons quoted and do not reflect an official policy or position of The Glenmede Trust Company, N.A., or its employees. Glenmede does not endorse or recommend AGF of Canada or any product managed by it, and does not receive any compensation from that entity or from the author quoted herein.