• Charles Heighton

Trump ends stimulus talks until after the election

By Charles Heighton – The London Financial Markets Editor and VP of Trading at King’s Global Markets

Just before the market close on Tuesday, President Trump announced via a tweet that all negotiations with the Democrats are ceasing until after the election. This is a bold strategy from the president, which in my opinion might cost a lot of basis points and even an election. This could be a ploy to get Speaker Pelosi to capitulate but this seems unlikely.

Source: https://twitter.com/realDonaldTrump/status/1313551794623127552

In this tweet thread, Trump clearly states a preference for nominating Amy Coney Barret to the Supreme Court, rather than pushing through a second stimulus bill. While this is a tactical decision as he seems to be on the cusp of losing power next month, it might not help him when the ballots are counted.

This decision may also have a knock-on effect on the markets that he loves to use as a barometer for his performance. The S&P closed 1.5% down despite being positive most of the day after this news caused a 2% drop. The NASDAQ closed nearly 2% down despite also being positive before the tweet. The Dow Jones also closed 1.3% down after a day that was green before the last 90 minutes. So the initial response was not good. Investors have been expecting this bill for months. They could shrug off this delay for the rest of the week, or it could be taken as negative due to the uncertainty it has caused.

Fed Chairman Powell warned that this stimulus was needed earlier in the day, as he is concerned about a weak recovery. Trump is obviously not worried about this or he cares more about securing a Republican majority in the Supreme Court. Pelosi effectively made this argument after Trump's tweet, stating that he is putting himself before the people.

As an observer, I find this decision a little odd. I cannot imagine that securing a Supreme Court nomination would be better for Trump's election chances than a stimulus deal. Although perhaps as a British outsider I am simply unable to ascertain the importance of the court to the American public. From this point of view, this decision seems like a desperate last attempt to exert power based on the reasonable chance that Trump will not be re-elected.

It is also fair to query whether this decision should be taken less than a day after Trump was in the hospital. He is still undoubtedly under the effects of the cocktail of drugs he was given. This strategic move may play well within Trump's base, but it may not be good for the markets or his chances or a second term.

Perhaps I will be proven wrong and this decision will turn out to be a genius one. In hindsight, the President may be shown to be playing chess while I see checkers. However, I am not holding my breath.

What do you think? Let us know in the comment section below!

Interested in writing for us? Click on the 'Write For Us' button at the top of the page!

Click here to visit WallStreetOasis.com


Recent Posts

See All