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December Rate Hike Could Be Thwarted by Government Shutdown: Valliere

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While lawmakers managed to avert a government shutdown with the recently passed continuing resolution, a debt ceiling or another government shutdown crisis looms when the CR expires on Dec. 11, warns political strategist Greg Valliere.

In a recent interview with ThinkAdvisor, Valliere, who recently left his post as chief political strategist at Potomac Research to become chief global strategist for global investment management firm Horizon Investments, said that Federal Reserve Board Chair Janet Yellen’s goal to raise interest rates in December “could be thwarted” if the government shuts down.

“I’m very apprehensive about December,” Valliere said. House Speaker John Boehner will leave and likely be replaced by House Majority Leader Kevin McCarthy, R-Calif., setting up “a very confrontational environment.”

Analysts at Washington Analysis noted in their Monday commentary that McCarthy is the most likely candidate to replace Boehner, ahead of Rep. Jason Chaffetz, R-Utah, and Daniel Webster R-Fla. “Though more closely aligned with the conservative wing of the GOP” than was Boehner, McCarthy “is unlikely to allow a government shutdown come December over short-term policy issues,” Washington Analysis says.

McCarthy’s ascendency to House speaker will be a “modest positive for the defense sector as a whole,” Washington Analysis says, as he is likely to favor a budget deal later this year that would: raise mandated spending limits for defense and non-defense discretionary outlays; and increase war spending to achieve a YoY defense spending increase near the $30 billion rise the House and Senate have advocated and the $35 billion increase the Obama administration requested.” Boehner, however, “likely would have accomplished something similar,” Washington Analysis states.

The Senate was poised to vote Wednesday on a $612 billion defense policy bill that President Barack Obama has threaten to veto.

In his new post at Horizon, Valliere joins a 12-member research team headed by President and CEO Robbie Cannon and Ron Saba, senior managing director of Investment Management.

Cannon said that “investing successfully in today’s world requires an understanding of both the political economy and market fundamentals,” and that Valliere “is widely known for his insightful analysis and has built an outstanding reputation with the investor community.”

Valliere also served as director of research at the Charles Schwab Research Group, and was chief policy strategist for the Soleil Securities Corp. Earlier in his career, he co-founded The Washington Forum, and served as chief political analyst and, ultimately, research director for the group. 

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