Morning Roundup

By Mark Masterson on September 8, 2021

Good morning,

Below are the news items moving markets today

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Executive Summary:

 

Another quiet day across capital markets – but a few interesting notes below…..

 

First – this is interesting.  The $3.5 Trillion spending bill may have some hurdles ahead…..

• Manchin only supports $1T-$1.5T of spending on social infrastructure:
• More focus on wide gap between moderates and progressives in the Democratic party and how it is complicating the path to additional fiscal stimulus.
• Axios reported that Senator Joe Manchin has privately warned White House and congressional leaders he has specific policy concerns with Biden’s $3.5T social infrastructure plan.
• Noted that he will support as little as $1T of it. Added that at most, he is open to supporting $1.5T.
• Compares to progressives like Senator Bernie Sanders, who has repeatedly stressed that Democrats’ $3.5T budget proposal is too low.
• Street still seems to expect more stimulus from Washington though the headline figure for the reconciliation bill was always expected to come down given the need to get centrist Democrats in the Senate on board.
• Biggest issue for market is the risk of higher taxes. Recent reports have reiterated that Democrats are likely to settle on a 25% corporate tax rate, up from current 21%.

Speaking of hurdles….Looks like crypto currencies hit an air pocket yesterday……

While an asset class, it is hard to view these as valid currencies when they can fall, or rise over 10% in a matter of minutes….

 

• Bitcoin plunges on the day El Salvador introduces the cryptocurrency as legal tender https://al/XPZfTi2
• Bitcoin plunged as much as 17% to its lowest level in a month as El Salvador’s crypto rollout got off to a rocky start https://al/VPcCia3 $BTC

 

Another interesting development as we move through September….the debt ceiling debate.

 

• The U.S. Congress is set for a showdown over raising or suspending its $28 trillion debt ceiling to prevent a government shutdown or worse, a technical default https://rs/3BQ8lwE

 

The current $28.5 trillion debt limit was hit back on July 31^st.  Remember, the  Treasury cannot issue more bonds without raising the ceiling.

 

Another updated interesting chart from Goldman Sachs…..

According to the latest reading of the @GoldmanSachs weekly index, US financial conditions have eased by 4.8 to 96.94, an all-time low (i.e., record loose level).

We have never seen such easy conditions.

Goldman Sachs

 

And – those 3^rd quarter GDP forecasts keep falling.  Note below the Atlanta Fed’s drop from 6% to now 3.7%….

Atlanta Fed GDP forecast dips to 3.7% annualized.

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Articles of Interest:

• Fed:
  • Bullard reiterates push for quick ‘taper’ despite weak US jobs growth (FT)
• Central banks:
  • PBOC officials push back against expectations for aggressive measures to boost economic growth (CNBC, Reuters)
• Washington:
  • Manchin has specific policy concerns with Biden’s $3.5T social spending dream, will support as little as $1T of it (Axios)
  • White House to include hurricane relief and money for Afghan resettlement in a package to fund government later this month (Politico)
• Economy:
  • US economy faces slowdown just as it was about to take off (WSJ)
  • Delta variant spread, lingering supply shortages leading to big Q3 growth forecast cuts (MarketWatch)
• Markets:
  • Investments banks Citi, Morgan Stanley and Credit Suisse cautioning investors about US equity outlook (Bloomberg)
• Covid-19:
  • 95% of US counties now see high Covid transmission rate, says CDC (TheHill)
  • US hits 75% first-shot goal (Bloomberg)

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Charts of the day:

 

As the markets keep rising, the dividend yields keep falling…..

It’s tough to find any yield today.  The Dividend Yield on the S&P 500 moves down to its lowest level in 20 years: 1.28%. Not far from the all-time low of 1.10% in 2000

 

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Quote of the day

Beware the fury of a patient man

John Dryden