Greg Valliere has a list of things that he’s worried about.
The chief global strategist for Horizon Investments shared that list with audience at the Schwab Impact conferenced in Chicago this week.
During his presentation, he outlined the six things that personally worry him.
“I’m going to challenge everyone … with a list of things that could go wrong,” he told the crowd.
1. Tax Bill
Nothing is certain when it comes to the Tax Cuts and Jobs Act.
While it passed the House on Thursday, the Senate must approve its own version, and “the votes are not definite,” Valliere said.
“Someone famously said ‘dealing with the Senate is like herding cats.’ Very hard for the Senate to get things done,” Valliere said. “We saw the debacle in the Obamacare [replacement] bill. Where just three negative votes killed it. And you have to wonder are there negative votes also for this bill?”
Another development that Valliere says few people are talking about is that the budget still hasn’t passed. “I think this budget plight in December could delay the tax bill,” Valliere said.
The other problem is reconciling the differences between the House and Senate bill, according to Valliere. He says that will require a conference committee, which “could drag past Christmas and into the new year.”
Valliere says he’s at “about 60/40 that we get” the tax bill.
“I sure would like to see the vote count when it comes to Rand Paul, the Alabama senator [who will be chosen in a special election on Dec. 12], John McCain, Susan Collins,” he added. “This is not a slam dunk.”
2. Budget Deficit
The second thing Valliere worries about is the budget deficit — which was $666 billion in the fiscal year that ended about a month and a half ago, he says.
“The deficit went up something like 18% in the last year. And I have to tell you, no one in Washington really cares,” he said. “I’m shocked by the lack of concern by this.”
And, according to Valliere, the deficit is only likely to go up because there’s “no spending restraint, a tax bill that will probably lose money and no one has the guts to look at entitlements.”
In all likelihood, Valliere sees the tax cut losing $1.5 trillion.
3. Federal Reserve Changes
Valliere said he was a “big fan” of Janet Yellen, whose term as Fed chair expires Feb. 3. He also thinks Jerome Powell, President Donald Trump’s pick to lead the Federal Reserve, is “first rate.”
“I think he will be a good Fed governor, but these could be uncharted waters for a while as the Fed loses their three most powerful players: Yellen, arguably the most dovish Fed chairman in our lifetime; the Vice Chairman Stan Fischer; and then [William] Dudley, the [Federal Reserve Bank of New York] president. All three quite dovish.”
Valliere said it could be “slightly unsettling” to see something different after this “exceptional period of monetary accommodation.”
Powell’s nomination is subject to Senate confirmation.