Threats In Limbo

Another day in post-Christmas, pre-New Year limbo produced little in the way of excitement, although I suppose that depends on one’s definition of “excitement.”

The outgoing President of the United States is still vociferously insisting that he may not, in fact, be “outgoing,” at least where that adjective means leaving office soon. If by “outgoing” you mean rambunctious, then Donald Trump is happy to wear your adjective.

On Tuesday, for example, he threatened to kill (politically speaking, one hopes) any Republicans who don’t vote to increase stimulus checks. “Unless Republicans have a death wish… they must approve the $2,000 payments ASAP,” he said. “$600 IS NOT ENOUGH!”

“And it is also the right thing to do,” he added, in an accidentally hilarious side note, which inadvertently underscored the fact that the whole debate over the size of stimulus payments is primarily about political survival, and only secondarily about Americans’ economic well-being.

Earlier, David Perdue and Kelly Loeffler came out in favor of Trump’s $2,000 push in a hopelessly transparent attempt to pacify both the president and Georgia voters ahead of next week’s critical  runoffs, which will determine control of the Senate.

Read more: Loeffler, Perdue ‘Delighted’ To Send You $2,000. Mitch McConnell, Not So Much

The House green lighted the larger payments on Monday, and Chuck Schumer attempted to do precisely what Trump demanded on Tuesday — namely, approve the $2,000 payments “ASAP.”

The effort was blocked by Mitch McConnell, much to Trump’s chagrin.

US equities acted briefly like they weren’t aware that getting the Senate to upsize the checks would be an uphill battle. Stocks sold off (albeit mildly) on the McConnell news. Mitch, a serial killer of legislation, has seen much worse press in his time than the headlines which were plastered all over the digital front pages Tuesday. While he may eventually find a way to placate Trump, one day of bad optics is hardly enough to make McConnell blink, let alone panic.

McConnell also objected to a motion by Bernie Sanders that would have held a vote on the larger direct payments promptly following planned action to override Trump’s veto of the defense bill. That, in turn, prompted Bernie to stymie consideration of the veto override.

It was still unclear after McConnell spoke on Tuesday what he plans to do, but it sounded as though he might try to roll up the stimulus check increase with measures addressing Trump’s Section 230 demands and paying some kind of lip service to election fraud allegations. While there’s broad support for revamping social media’s liability shield, McConnell surely knows that any kind of nod to a formal investigation of the election claims that were rejected by nearly every court in the nation, including a Supreme Court stacked for Trump, would be seen as outrageous by Democrats. There is no chance (none) that Schumer would trade anything like that for $2,000 checks, especially not when it’s still possible that the Georgia runoffs could flip the Senate, effectively clearing the way for Democrats to secure more stimulus later.

Back on the market front, Apple hit an intraday record Tuesday just after the open, before eventually giving back gains. It’s leading Amazon for the title of year’s best big-tech performer. Apple is up 86% for 2020. That’s on top of 2019’s massive gains.

Needless to say, both are running roughshod over the broader market. And that’s where things get circular. After all, gains in the tech titans are a big part of why benchmarks were able to perform in a year blighted by the worst public health crisis in a century.

Meanwhile, breakevens are near 2%. What you see in the simple figure (below) is, in part, a referendum on the Fed’s success, and it’s worth taking note of.

If the idea is to buoy inflation expectations while keeping nominals under control and suppressing real rates to ensure loose financial conditions, what we’ve seen over the past eight months is precisely that.

The recovery in breakevens came in lockstep with rising stocks and a rebound in crude, and recent momentum is predicated at least in part on vaccine hopes and the prospect of Janet Yellen at Treasury.

Late in the US cash session, Joe Biden again warned that the next several weeks (and perhaps even months) will be rough for Americans. The pandemic, Biden cautioned, will get worse before it gets better. He pledged to provide 100 million shots during his first 100 days in office. The CDC now projects that the US death toll could reach 400,000 by the time Trump leaves. Assuming he leaves “on time.”

Kamala was given the Moderna vaccine on Tuesday.