Mnuchin Pushes for Stimulus Deal, but Faces Opposition

Treasury Secretary Steven Mnuchin

Stocks are falling this morning as investors grow impatient with the ongoing stimulus talks in Washington.

Or, in this case, the significant lack of productive discussion. Little progress had been made over the last week, and today, Treasury Secretary Steven Mnuchin reiterated that it would be tough to get a deal done before the election.

Still, he and President Trump are pushing for an agreement with House Democrats, who Mnuchin says want an “all or nothing” bill.

House Speaker Nancy Pelosi and Mnuchin are set to speak again this afternoon about the proposed relief package – something traders will undoubtedly watch closely.

But lurking beneath the surface might be an even more important development. The Labor Department revealed that 898,000 Americans filed first-time jobless claims last week, surpassing the Dow Jones estimate of 830,000.

The U.S. labor market remains a stubborn laggard among the other portions of the economic recovery, and unless unemployment continues to drop, a “V-shaped” return to form could be delayed.

Meanwhile, Covid-19’s making a comeback in Europe. Governments are now reimposing lockdown restrictions to limit a second wave of the virus. In France, a public health emergency has been declared. Germany has introduced a slew of new rules. The U.K. is fast approaching another lockdown as well.

The smug European Union, which once lambasted the U.S. for its high number of coronavirus infections, is suffering a resurgence in cases. Ian Shepherdson, Chief Economist of Pantheon Macroeconomics, went so far as to call the situation “out of control.” At present, Johns Hopkins reports that there are 6.5 million confirmed cases in Europe vs. 7.9 million stateside.

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Overall, the European “Covid renaissance” has added another stressor to an already mixed bag of market influences.

“Market volatility is set to continue in the weeks ahead as investors brace for a host of uncertainties—the timing of vaccine availability (after a setback for Johnson & Johnson), the size and timing of additional US fiscal stimulus, and the election outcome,” explained Mark Haefele, chief investment officer of global wealth management at UBS, in a note.

“The uneven recovery in the US economy also adds to investor concerns as the results season kicked off this week.”

Perhaps the biggest surprise of all, though, was a relatively strong batch of Q3 earnings. Several major companies have reported already, and so far, they’ve mostly beat expectations. Jeff Kilburg, CEO at KKM Financial, maintains that earnings will prove crucial given the current investing climate.

“This is the second earnings season in the wake of the Covid-19 pandemic […] and arguably this will be one of the most important earnings seasons ever,” he wrote.

“As investors globally try to gauge the actual damage inflicted upon the economy by Covid-19, expectations are simply that earnings will not be as bad as they were in Q2.”

America’s top corporations are currently on track to surpass Q2’s numbers with ease. If the trend holds, investors should have plenty to be happy about as they approach what will likely be a controversial presidential election.

However, that doesn’t mean bulls should rule-out any pre-election “bombshells” in the near future. For example, former Mayor of New York City Rudy Giuliani believes that he has some serious dirt on Hunter Biden, son of Joe Biden. Moreover, Giuliani says that his evidence implicates the entire Biden clan in a broader scheme that funneled foreign cash into the family’s coffers, Joe included.

Is it true? And, more importantly, will anything come of it pre- or post-election? Maybe, maybe not. Either way, it’s not a good look for Biden if the texts and emails revealed by Giuliani prove to be legitimate.

Wall Street once expected a Biden landslide victory in November. Now, in light of Giuliani’s discovery, their tune might change, injecting more uncertainty into the market.

Which, these days, isn’t good for anyone. Regardless of whether you’re a bull, a bear, or somewhere in between.

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