Beto O’Rourke, long expected to step into the race for the Democratic bid, has finally announced he will. The young Texan lost a close race to Ted Cruz in Texas in November, but is aiming to ride his surge in popularity to the White House. Unlike many other contenders from the Democratic party, he is more of a centrist, not adopting the now-common socialist platform. Commenting on his candidacy, Beto says “The challenges that we face right now, the interconnected crises in our economy, our democracy and our climate have never been greater. They will either consume us, or they will afford us the greatest opportunity to unleash the genius of the United States of America”.
FINSUM: Outside of maybe Bernie Sanders, we think Beto is the biggest contender to Trump because he may be able to simultaneously get voters on the far left and some of Trump’s more centrist supporters.
When and if the US-China trade deal finally happens, make sure to sell. At least that is what Bloomberg is arguing. In a classic case of buy the rumor, sell the news, Bloomberg thinks the completion of a deal should be a sell trigger. The trade situation itself is shaping up as a lose-lose for investors. Either it will be a symbolic-only deal that is short on details and does little to actually resolve tension, or Trump may walk away from the table with no deal (like with North Korea). In either situation, it is hard to see the market celebrating.
FINSUM: We tend to agree with this view. The way this is shaping up, it does not seem like there is going to be some grandiose trade accord that solves everyone’s issues.
Michael Cohen, Trump’s former lawyer, is set to hold his first and only public hearing on Thursday, when he will testify in front of the House about his dealings with President Trump. Cohen is reportedly going to directly accuse Trump of criminal activity in addition to testimony regarding “lies, racism, and cheating”. He will not be speaking about Russia matters under the purview of the Mueller investigation. The White House commented that “Sadly, he will go before Congress this week and we can expect more of the same … It’s laughable that anyone would take a convicted liar like Cohen at his word, and pathetic to see him given yet another opportunity to spread his lies”.
FINSUM: This is either going to be a media firestorm or a dud. If Cohen doesn’t say anything new, it will be hard for the media to make much of it.
Next week is going to be a media circus, as the odds of real Trump fireworks look likely to surge. The reason why is that Michael Cohen is going to testify at an open public hearing before the House Oversight Committee next Thursday. The committee, seemingly defending its actions, commented that “Congress has an obligation under the Constitution to conduct independent and robust oversight of the Executive Branch, and this hearing is one step in that process”. The questions Cohen will answer will concern hush money payments, potential Trump conflicts of interest etc, but will not touch on Mueller’s probe into Russian interference.
FINSUM: No matter how you feel about Cohen, or whether you think this is just political theatre, the odds of a media bombshell, true or not, seem high.
The pool of Democrats keeps moving left. In what comes as a no surprise (but was not a sure thing), Bernie Sanders has just announced his candidacy for the 2020 election. His platform is going to be built around three pillars: free education, Medicare for all, and a $15 minimum wage. Sanders narrowly missed the Democratic nomination in 2016 and has a particularly strong following among the young.
FINSUM: Politics could not be more polarizing right now, so in many ways it makes sense that the Democratic candidates are quite far left. The difference between now and 2016 is that those leftist narratives have more popular traction than the more centrist position Hillary Clinton adopted then.
Advisors need to be worried about 2020 because some major changes may be on the way. Some of the most prominent Democrats, including presidential candidates are putting forth incredibly progressive proposals which call for heavy tax hikes. For instance, Elizabeth Warren, who will be running for president in 2020, is calling for a wealth tax of 2-3% on those with over $50m of assets. Economists say such a measure would raise almost $3 tn over a decade. Democratic party darling Rep. Alexandria Ocasio-Ortez (D-N.Y.) has put forward a plan calling for up to 70% tax rates on the wealthiest Americans.
FINSUM: In our view, the specific plans are not as important at the moment as the overall direction of the Democratic party and its candidates. While this is very divisive policy, it is a reflection of how polarizing national politics have become. It is also notable because this kind of major plan is the type of platform that can really drive Democratic policy going forward. This may become a rallying cry for the party.