Tags: investors | trump | government | peace | harmony | capitol hill

'Lack of Peace and Harmony' in DC Threatens Investors

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Monday, 28 January 2019 09:05 AM Current | Bio | Archive

Partial Government Shutdown Is ‘Temporarily’ Over

The U.S. government partial government shutdown has ended, at least for the moment as another shutdown could be on its way.

Anyway, hundreds of thousands of federal workers can return to work and receive their first paychecks. 

The temporary opening up of the U.S. government limits the immediate economic damage as government employees get their first pay this week and economic data can start to be published again, NPR reports.

However, the temporary truce between Republicans and Democrats does not rule out the possibility of another shutdown in three weeks’ time.

The Wall Street Journal reported that President Trump said he wouldn’t rule out another shutdown, calling it “certainly an option.” On Sunday Mr. Trump said he doesn’t believe congressional negotiators will strike a deal over border-wall funding that he could accept and vowed that he would build a wall anyway, using emergency powers if need be.

More importantly, the events of the past two months, do not signal that peace and harmony is likely to be a hallmark of relations between the White House and Capitol Hill. With a proper budget to negotiate in September and a debt ceiling to be lifted probably during the second quarter, this lack of peace and harmony is something that may worry investors.

This week, we’ll have a few interesting events that are of interest to investors.

On Wednesday we’ll have the conclusion of the 2-day Federal Open Market Committee’s (FOMC) meeting that will probably leave interest rates unchanged while we’ll see if we get a hint that one or two of rate hikes later this year are still on the cards.

It could also be interesting to see if Fed Chair Powell would be willing to give some more information on how the Fed ‘thinks’ about the Federal Reserve’s further path of their mortgage and Treasurys ‘portfolio drawdown’, which started in 2017 when they allowed securities to expire without reinvesting at maturity.

On Wednesday and Thursday, January 30-31, we’ll have in Washington high level U.S.-China trade talks between Chinese Vice-Premier Liu He, who will lead a 30-person delegation, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin with their teams. Both sides will try to resolve deep differences over China's trade and intellectual property practices, industrial subsidies and market access to avert an increase in U.S. tariffs on Chinese goods scheduled for March 2, Reuters explains.

As an investor, I would try to limit my expectations, and not at least on “time.”

On Friday we’ll have the U.S. employment situation data that is expected to remain good.

The Chicago Fed National Activity Index

Index points to a slight increase in economic growth in December. Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) moved up slightly to +0.27 in December from +0.21 in November. Two of the four broad categories of indicators that make up the index increased from November, and two of the four categories made positive contributions to the index in December. The index’s three-month moving average, CFNAI-MA3, edged up to +0.16 in December from +0.12 in November.

JP Morgan Warning

Besides all that, CNBC reported that JP Morgan co-president, Daniel Pinto, has warned investors will probably see several more market events like we saw in December.

As an investor, I wouldn’t take this warning lightly.

Brexit Saga is Set to Go Into Prolongations

For anyone that has remained awake during the interminably tedious process of getting the UK out of the European Union (EU), this week is a moderately important week. There is every chance that the UK Parliament will make the process drag out even longer.

Parliament is set to vote tomorrow on the government’s plan B, which is the government’s plan A cunningly disguised to something new by the strategic positioning of the smallest of all possible fig leaves.

What matters, is the series of amendments that is to be voted on, which may allow the process to be extended until December. The idea of talking about Brexit until December is enough to drive any self-respecting economist to complete despair and doesn’t help or guide at all long-term investors. Speculators will have a lot of opportunities to win and lose a lot.

Meanwhile, the Irish government has been suggesting that it absolutely will not renegotiate the Irish border backstop, which is the one thing the British Parliament will absolutely want to renegotiate, RTE reported.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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With a proper budget to negotiate in September and a debt ceiling to be lifted probably during the second quarter, this lack of peace and harmony is something that may worry investors.
investors, trump, government, peace, harmony, capitol hill
Monday, 28 January 2019 09:05 AM
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