CNN Business/Matt Egan
Trump’s Covid-19 diagnosis is another market-moving wild card
One risk today is that Trump’s battle with Covid-19 spooks American consumers, the main driver of the US economy. The president’s infection shows that even the most protected person on the planet is vulnerable to the deadly virus.
“President Trump’s illness and the unprecedented political rancor over the election may be too much for people to bear,” Mark Zandi, chief economist at Moody’s Analytics, wrote in a report Sunday. “If as a result they lose confidence in the recovery and pull back on their spending, investment and hiring, then the recovery will unravel.”
But the opposite could be true as well. If Trump is able to quickly return to the White House and fully recover from Covid-19, it could deliver renewed confidence to nervous Americans.
The outbreak in the White House could speed up deadlocked talks on providing more stimulus to an economy screaming out for it. In one of his first tweets since being hospitalized, Trump pressed lawmakers to make a deal.
However, three GOP Senators have tested positive for Covid-19, casting doubt on the ability of Congress to get major legislation passed anytime soon. Senate Majority Leader Mitch McConnell announced over the weekend the Senate would halt floor action over the next two weeks, meaning no votes will happen this week or next.
“We continue to believe time — and politics — will prevent a deal before Nov. 3,” Chris Krueger, policy analyst at Cowen Washington Research Group, wrote in a Monday note to clients. “Given policy volatility, [it’s] very hard to have any conviction right now.”
Fed’s Evans Says He’d Welcome 2.5% Inflation Rate in U.S.
Federal Reserve Bank of Chicago President Charles Evans said he would welcome 2.5% inflation in the U.S. for a time in order to average out the current period in which price pressures are running below the central bank’s 2% target.
“I think we have to cross over, beyond 2%, with some momentum,” Evans said Monday during a Bloomberg TV interview with Michael McKee. “I would be quite pleased if we could get core inflation up to 2.5% for a time.”
The Chicago Fed president’s comments followed earlier remarks Monday at a virtual conference in which he predicted it would be several years before the inflation rate, which by the Fed’s preferred measure was 1.4% in August, rises back to the target, and foreshadowed a debate about when and how fast to raise interest rates once the target is achieved.
“I expect inflation to slowly improve, reaching 2% on a persistent basis in 2023 and then moderately overshooting 2% over the following few years,” Evans said at the National Association for Business Economics conference.
“We likely have a lot of work ahead of us. And it’s crucial that we acknowledge the magnitude of the job up front to help lessen the temptation to back off the overshoot too early in the process,” he said.
Fed officials announced in August that they would shift to a policy of allowing inflation to overshoot the 2% target following periods of under-running it such that inflation averages out to 2% over time. In September, they announced they would leave the central bank’s benchmark interest rate near zero at least until inflation had reached 2% and was on track to overshoot.
Business leaders call for urgent reforms as global economy faces its ‘worst state in a century’
Top business leaders say the global economy is facing its worst crisis in a hundred years, and “downside risks remain elevated” unless urgent reforms are enacted during the G-20 summit hosted by Saudi Arabia in November.
“The global economy is in its worst state in a century,” warned Yousef Al-Benyan, chairman of the Business Twenty (B20), a group made up of high-level CEOs from around the world. “The challenging opportunity is to build back better, with real urgency required from policymakers and business leaders,” he added.
The B20 is an engagement group that seeks to represent the voice of the global business community across all member states and economic sectors in the Group of 20.
The group is urging G-20 leaders to undertake “bold and broad based” policy action to put the post-pandemic economic recovery on a stronger, more stable growth path. It said trade tensions, policy uncertainty, geopolitical strains and building financial vulnerabilities were key risks to the outlook, as societies and economies navigate the crippling impact of the coronavirus.
“As the economic recovery evolves over the next couple of years, downside risks remain elevated,” Al-Benyan said, raising concern about low productivity growth and rising inequalities.
Gold will be the victor in this year’s U.S. election – Heraeus
The gold market has priced in a lot of geopolitical turmoil ahead of the Nov. 3 U.S. election, but one precious metals firm said that it expects gold prices to remain well supported as this will be an election like no other.
Gold has managed to hold critical support above $1,900 an ounce nearly a week after Democratic nominee Joe Biden and Republican nominee President Donald Trump clashed in a chaotic debate. Analysts at
Germany-based Heraeus Precious Metals said that uncertainty ahead of the election would continue to support gold prices in the near-term.
“A great deal of political and economic uncertainty is already priced in for gold, but it could intensify as election day approaches, increasing the allure of gold as a safe haven,” the analysts said in a report published Monday.
Quoting election models from the Economist, the analysts said there is an 88% chance that Biden will win the election; however, because of the Electoral College, they added that Trump could still pull out a victory.
However, regardless of who wins, the German firm said that gold would continue to benefit. They noted that a Biden victory could push assets away from volatile equity markets and into more safe-haven assets like gold. Meanwhile, if Trump is reelected, the Republican president will still face an economy that is on a precarious edge.