From the beginning, the Heisenberg raison d’être (if you will) has always revolved around the extent to which politics influence asset prices.
To be sure, I predicted more than a year ago that geopolitical outcomes would be the primary driver of market moves going forward. I had no idea how correct that assessment would ultimately prove to be.
Of course keeping up with politics on both sides of the Atlantic is damn near impossible thanks to the constant jockeying for position in France and the haphazard manner in which the Trump administration is handling the implementation of the President’s agenda.
Needless to say, there’s lots going on in Washington this week and with all the headline hockey, it’s sometimes hard to separate the wheat from the chaff.
Fortunately, Goldman is here to help. And you know you can trust what they say about D.C., because… well… because they f*cking run it.
So without further ado, here are “4 political risks [the bank] is watching.”
We address the outlook for potential risks related to the congressional agenda that have received attention among market participants recently: the prospects for further delays in passing the pending health care legislation, the upcoming Supreme Court nomination debate, the April 28 deadline to extend government spending authority to avoid a government shutdown, and the recent reinstatement of the debt limit.
We expect the health care bill to pass the House this week, but we believe Senate passage next week will be much more difficult, and that a bill will not reach the President’s desk before May, delaying the start of the tax reform process somewhat.
The upcoming debate over President Trump’s nominee for the Supreme Court could result in a further change to Senate rules that could complicate political negotiations in other areas. However, at this point the risk of such a rules change appears to have receded.
The April 28 deadline that Congress faces to renew expiring spending authority poses slightly greater risk. Congressional Republicans will be under pressure to include funding for the President’s proposed border wall in the upcoming spending bill; if Democrats object, the federal government could temporarily shut down. We believe a compromise will be reached, but the perceived probability of a shutdown is likely to rise in the meantime.
The debt limit was reinstated on March 16, but we estimate that the Treasury will have until at least August and perhaps as long as October to raise it. In light of single-party control of government, it is hard to imagine that the upcoming deadline will be as disruptive as some recent experiences. However, the need for bipartisan support implies a somewhat unpredictable path to resolution, in our view.