Invoking Winston Churchill, who famously said, “It is perhaps the end of the beginning,” Washington-based pundit Greg Valliere is convinced last week was a prelude to the coming turning point that will start to release Americans from the deadly grip of coronavirus.
Passage of the financial stimulus bill and signs that new COVID-19 cases in Italy are slowing, among other developments, support his optimistic view, as he tells ThinkAdvisor in an interview.
The well-connected chief U.S. policy strategist at AGF Investments provides investors with daily insight and interpretation of goings-on at the nexus of Washington and Wall Street via his popular blog, Capitol Insights.
In the interview, the veteran financial services guru provides his forecast for the recovery from the recession the U.S. seems to be slipping into, a formidable repercussion of the pandemic.
Citing the two prevalent “radical views,” he also examines the critical issue of when Americans may well break free of lockdown and return to work.
For more than 30 years, Valliere has analyzed politics and policy for institutional and retail investors. One of his specialties is the Federal Reserve.
At AGF, he is charged with providing insight into how U.S. policies are shaping global markets.
Previously, he was chief global strategist at Horizon Investments.
Turning to the 2020 presidential election campaigns — mostly muted lately because of the pandemic — in the interview, he floats two names as likely better Democratic candidates than Vice President Joe Biden to go up against President Donald Trump, particularly on the pandemic issue. He argues that these prominent high-level politicians have emerged as “the two big, big stars in the Democratic Party.”
ThinkAdvisor interviewed Valliere, by phone from Washington, on Wednesday. The frequent industry speaker deemed Federal Reserve chairman Jerome Powell a “hero” and explained why even Trump has taken to flattering him.
Here are excerpts from our interview:
THINKADVISOR: The U.S. has probably entered a recession. What do you forecast for the recovery?
GREG VALLIERE: The enormity of the stimulus bill — billions in corporate assistance and checks to individuals — accompanying what the Fed has done, increases the chance that the recession will be a “U” shape: We’ll go down sharply for a quarter and then start to come back pretty sharply in the second half.
What’s a major difference between this financial collapse and the 2008-2009 meltdown?
The banks are very well capitalized [now]. So there’s no issue of bank capitalization, and the Fed is going to make sure that won’t be a concern. We’re awash in liquidity. That’s a bigger story than taking interest rates down to zero. Liquidity is what keeps the markets lubricated. Jerome Powell [Federal Reserve chair] made it clear on Monday that he’ll do whatever it takes — that money is no object. Powell is the hero.
Is he heroic in President Trump’s eyes?
Trump, of all people, called him earlier this week [week of March 23] to congratulate him on what a great job the Fed has done. I think we’re now at a point where Trump needs Powell, and he’s become very flattering and complimentary to him.
What’s your thinking on where the U.S. is on the coronavirus pandemic timeline?
When the history of this horrible disease is written, we’ll look back on this week [of March 23] as the beginning of a turning point that’s coming for the country and the economy. As Churchill said, “It is perhaps the end of the beginning.” The stimulus bill has passed. Even conservative Republicans were convinced they needed to spend this money. Desperate times require desperate measures.
What else indicates that we’re nearing a turning point?
[New cases] in Italy have begun to level off. I think that in two or three weeks, there will be similar improvement in Spain, France and the U.K. and maybe in a month or so, in North America.
What are your thoughts about the stimulus money that is to come from the government?
One of the key questions is when do the checks get to people, and when does the aid get to companies? I fear it’s not going to be lightning-quick. It will take a while. The [Beltway] people I’ve talked to in the last 24 hours tell me it could be well into April before anybody gets a check.
What will be emphasized historically about the coronavirus pandemic?
Maybe the most significant thing will be the very serious debate that’s starting over whether we should allow people to venture forth [to work, etc.]. Maybe they would be young people and people in parts of America that haven’t been very badly affected. We’re at the start of a very serious debate about whether we can shut down America for months and months. I don’t think that can happen without tearing at the fabric of the economy and society.
What’s the other side of the debate?
One radical view is that we stay locked down through the summer. The other radical view is that we should start letting people out at Easter, which is equally reckless. Trump had said that maybe by Easter — April 12 — we might be able to get back to normal. Scientists agree it’s ludicrous and reckless to say that. It gives people false hope, and it may lead to complacency, which is the last thing you want to see. [On Sunday, Trump extended federal social distancing guidelines until April 30.]
How do you rate Trump as a role model for social distancing?
At his recent press conference, there was no social distancing: The people were all jammed together like sardines. Trump shook hands with everybody. It’s a miracle he hasn’t gotten COVID-19.
The stimulus bill provides for $1,200 per person and $500 for each child. Do you think that will help much?
It’s not a lot. I think the states need more money, too. I believe there’s going to be a fourth bill, maybe in June or July. If the economy needs more help, I think it will come. And that can drive the deficit to $4 trillion!
When we spoke last November, you pointed to an “orgy” of government spending, an indication that concern over the ballooning federal deficit was “passe.” Is this still the case?
Absolutely. We were headed for something above $1 trillion even without the coronavirus, and now with the $2 trillion bill and the loss of revenues, which are going to fall off a cliff, I think $3 trillion is virtually guaranteed for fiscal year ending Sept. 30. We may go even higher.
How blasé are people about that?
Nobody cares, including the bond market. Yesterday I had a conversation with a high-net-worth client who’s always nervous about the deficit, and they said “Isn’t this [stimulus money] going to mean a big surge in inflation?” My response was, “Inflation is the last thing we have to worry about.” If inflation were going to break out, it would be centered on wages, historically an area where you [see] inflation. Well, there isn’t going to be any wage pressure anytime soon. That’s for sure.
What’s the buzz about Vice President Joe Biden’s run for Democratic presidential nominee? As the coronavirus spread in the U.S., it seemed that he absented himself from public view.
He vanished for the last week. He was slow to react. He went public yesterday with a video. He was adequate — not great or dynamic. Here’s the question: Is Joe Biden the right candidate to go after Trump’s inattention to this problem [pandemic]? The jury is still out on whether he can prosecute this case.
Is there any other Democrat that you think would be a better candidate?
When you see someone young and vibrant like Gavin Newsom [governor of California, age 52] and Andrew Cuomo [governor of New York, age 62], both of whom I think have handled the pandemic quite well, you have to say: Is Joe Biden [age 77] the best the Democrats can come up with? Both Cuomo and Newsom have had phenomenal reviews [as leaders during pandemic]. They’re now the two big, big stars in the Democratic Party.
What about Sen. Bernie Sanders? Is he still viable as the nominee?
Bernie has burned a lot of bridges within the party in the last few weeks. There’s a resignation there that Joe Biden isn’t dynamic and doesn’t inspire people — but I think he’s the likely nominee.
Realistically, does either Cuomo or Newsom have a chance?
There’s a history of conventions not picking on the first ballot. So it’s not inconceivable that the party might want to go for a younger, more dynamic candidate — and I think they would look at Newsom or Cuomo. The two of them have really opened a lot of eyes about who the stars of the party are.
What’s the bottom line impact of Trump’s impeachment?
It had minimal impact on politics. His job approval number didn’t budge. In fact, that number has been up a few points in the last two to three weeks even though I think he’s been pretty uneven. The impeachment story was hardly an issue in the Democratic primaries in Iowa, New Hampshire and elsewhere.
Might Trump’s impeachment have helped him in some way?
He will certainly say that he would have been more vigilant on coronavirus had he not been bogged down by impeachment. He’ll use that as an excuse. He’s quite good at that sort of thing.
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