The Game’s Afoot, Watson
by David Reavill
In just 76 days, we will march to the polls to elect a new Congress and one-third of the US Senate. It is a time-honored tradition that this country has been performing for 246 years.
As we see more and more, it is also part of a carefully orchestrated effort by many in Washington to project an image. Leaders from both sides of the aisle are on their best behavior to portray themselves and their candidates in a winning light. Nothing is left to chance. Every utterance is made within the framework of how it will sound to the electorate.
No wrong moves here; this is for the whole enchilada.
The American approach to elections is unique. Unlike the British, for instance, the Americans take excessive time to campaign. Tradition has it that the campaign season lasts less than a year and gets underway only after Labor Day. And while that may have been the case in years past, it is not true today. Today campaigns begin months, if not years, before the actual election.
This time allows campaigns to focus on particular issues, sometimes affecting just a part of society. Lyndon Johnson, for instance, focused his Great Society Campaign on the poor and oppressed. While Franklin Roosevelt issued a broad-based appeal with his theme song, Happy Days Are Here Again, as the country struggled to recover from the Great Depression. And John Kennedy warned the nation that it was facing a “missile gap” with the old Soviet Union.
However, while candidates may feel that they’re in charge, guiding the course of the campaign, a circumstance often takes over. History leads the election and the nation in an entirely different direction. Such was the case for Herbert Hoover and Jimmy Carter, as both saw their re-election bids sink under the weight of a disastrous economy.
Although he won’t appear on the ballot this year, there can be little doubt that Joe Biden, and his record on the economy, will be front and center on every voter’s mind.
Tomorrow we will get the second estimate of the Nation’s Second Quarter GDP. There is little doubt that, once again, this measure of the overall economy will be down. Down not for the first time, but the second quarter in a row. Up to now, a sure sign that we are in a recession. When the “National Bureau of Economic Research makes, that call is anybody’s guess.
So, keeping all this in mind: we’re in the middle of a crucial election. And the election will determine the success or failure of the next two years of Biden’s Term. It doesn’t take much to suggest that the year’s most highly charged economic address will likely go in the direction the White House wants. Remember: nothing happens in Washington by accident.
This Friday morning, Chairman of the Federal Reserve, Jerome Powell, will address the annual Fed conference in Jackson Hole, Wyoming. It is billed as his speech on the state of the economy. I prefer to think of it as his campaign address for the Biden White House. After all, it was just three months ago that the President did nominate, and the Senate did approve Powell’s second term as Chairman. Don’t you think that Powell might owe the President just a little?
Many friends on the Street are worried that Powell will come out breathing fire and brimstone. You may have seen the articles claiming that he will go all-out hawk, promising to raise interest rates and tighten down on the economy.
I see the chance of that to be extremely remote.
Instead, I believe it will be a speech full of all the requisite charts and graphs. Complete with Economic Macro and Micro data and entirely political. Powell will doubtless continue his theme of “we’ve got this.” Everything is under control. The Fed can manage this economy without sending it into recession or hype-inflation.
What else can he say?
After all, his old friend Joe will be watching from the sidelines. And you wouldn’t want to disappoint Joe.
Remember Watson: in Washington, everything is planned.
Oil concerns are back on the table this morning after last night’s report by the American Petroleum Institute that oil stocks in the US were down over 5 million barrels for the week. West Texas Intermediate, America’s benchmark crude, is trading at nearly $95 per barrel, up $10 from a couple of weeks ago. While Brent Crude, the European benchmark oil, is back above $100 per barrel.
The news out of the Real Estate sector continues to be dismal. As New Home Mortgage Applications continue to decline as buyers pull back from new home purchases. Mortgage applications were down 1.2% last week and a whopping 21% from last year.
We will soon get the latest on Pending Home Sales, and Wall Street Analysts expect they will mirror the new mortgage applications. Down around 20% for pending home sales is Wall Street’s best estimate.
Also, Durable Goods Orders will report those long-term purchases in plant and equipment shortly. The Street is looking for softer Durable Goods Orders here, but still positive.
I want to call your attention to the continuing saga with Twitter. As you know, there is a heated back-and-forth between management at Twitter and Elon Musk’s bid to take over the company. Frankly, I’m less concerned about how that acquisition turns out than I am about some of the revelations on Twitter’s users.
A Whistle Blower has stepped forward to lend credence to the idea that much of the User Data at Twitter is false, that the social website gets nowhere near the number of daily and monthly users they claim. If that proves to be the case, that could profoundly affect that part of the tech sector. Just think about how much of this market performance is based on companies like Twitter, Facebook, and Google.
We need to watch this closely.
From the earnings desk, positive results so far from cad company AutoDesk and defense contractor II-VI, with not so positive results from Petco Health and Wellness.
Later today, we will get results from West Coast companies Nvidia and Sales Force dot com.
This year’s election is about performance.