Rain or shine, Joe Biden wants to own this economy

Jun 27, 2023

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It’s Joe Biden’s economy now. That’s exactly how the White House wants it.

The administration on Monday kicked off a three-week roadshow to showcase how policies addressing everything from broadband infrastructure to insulin prices have started to yield economic benefits to working class Americans. White House officials are pitching congressional Democrats on incorporating the themes of the “Investing in America” tour — which has ushered the portmanteau “Bidenomics” to the discourse — into their messaging as the 2024 campaign begins.

The trouble with Bidenomics has been that Americans haven’t been especially impressed with the administration’s handling of the economy through his first two and a half years in office (Republican leaders in Congress aren’t faring much better.)

Sure, the unemployment rate is close to historic lows — particularly among Black and Hispanic populations — and, yes, wage growth climbed even as inflation carved away at consumer spending power. Still, the economy’s resilience hasn’t provided the administration with the sort of boost one would normally expect.

Anita Dunn, one of the president’s closest advisers and strategists, said during an appearance on MSNBC’s “Morning Joe” that the aim of the new messaging rollout is to highlight how “people are just starting to really feel the effects of these programs that were put in place the first two years of Joe Biden's presidency.”

The extent to which Biden and his lieutenants can sell voters on that point will have tremendous bearing on his ability to secure a second term. To be sure, the Bidenomics rollout is coming at an opportune moment — there are some signs Wall Street and consumers are starting to shake off some of the negative vibes that dogged economic outlooks for the last year.

But it also comes with political risk.

Taking ownership of the economy’s resilience will make it that much harder to defray any blame if the U.S. enters a slump between now and November 2024. While Dunn dismissed the notion that Republicans might be able to co-opt the “Bidenomics” tag in the event of a downturn — “Even if the economy is doing well, the Republicans will say it's doing poorly. So we're not going to spend a huge amount of time worrying,” she said — it’s now easier to blame the White House if that slump occurs.

“We've had a fair amount of fiscal stimulus in the system from the Biden administration and their policies,” Unlimited Funds CEO Bob Elliott, who previously led research at Ray Dalio’s hedge fund Bridgewater Associates, told MM on Monday evening. “That has moved [the economy] to a point where we're likely to get a downturn, meaningfully closer to the election than if the Biden administration hadn’t been as stimulative and if the Fed had been more aggressive.”

“It’s pushing the recession risk close to the election,” he added.

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Driving the day

Durable goods orders for May will be released at 8:30 a.m. … S&P Case-Shiller home price index for April is out at 9 a.m. … New home sales for May will be out at 10 a.m. … Consumer confidence will be released at 10 a.m. … Assistant Treasury Secretary Graham Steele and Treasury’s Director of Federal Insurance Steven Seitz will speak at the Brookings Institution on insurance and climate-related risk at 10 a.m.

Home, is where I want to be (if I can afford it) — Our Jasper Goodman: “The Treasury Department on Tuesday called on insurers and state regulators to ramp up their efforts to evaluate risks posed by climate change, writing in a report that global warming presents ‘new and increasingly significant challenges for the insurance industry.’ In a 73-page report, Treasury’s Federal Insurance Office wrote that state regulators should ‘develop and adopt climate-related risk monitoring guidance appropriate for their markets” and encourage insurers to collect “more granular, consistent, comparable, and reliable data’ on climate risks.”

— Bloomberg’s Nic Querelo: “A Florida state agency is selling municipal bonds to backstop the state’s homeowner’s insurance industry after a surge of claims and litigation drove some insurers to shutter.”

Major case — Our Brian Faler: “The Supreme Court announced Monday that it will hear a challenge to the constitutionality of taxing unrealized income in a case that could have major implications for federal tax policy.”

First in MM: The CFTC’s next voluntary carbon markets meetup — Declan Harty reports: One year after the inaugural gathering, the CFTC will hold another summit on voluntary carbon markets on July 19, according to the agency. No formal agenda for the meeting has been released. The announcement follows the CFTC’s recent call for tips on misconduct in the carbon markets.

What’s in a name? — Jordan Wolman reports: BlackRock CEO Larry Fink isn’t using the term “ESG” anymore. Don’t expect that to change much of anything about the way the world’s largest asset manager does business.

Fink’s comments on Sunday reflect on the way Republicans have politically weaponized the use of environmental, social and governance factors in investment decisions. But even if the term “ESG” is no longer fashionable, no one is walking away from the consideration of the factors themselves.

That’s because financial firms are in the business of making money. And there’s lots of it to be made in the green transition.

“They have inadvertently wandered into an area of what's known as political risk, where they're suddenly under fire because of something happening in the political zeitgeist,” said Todd Phillips, a fellow in corporate power at the Roosevelt Institute and a former attorney at the Federal Deposit Insurance Corp. “And ESG is certainly that. I found Larry Fink's statements really fascinating because it's clear that they're not planning on changing course when they say that investing with environmental principles in mind is good for their investors. They just don't want to talk about it that way because they're under fire.”

Regulatory Corner

Lawmakers want OT on MiFID II relief — Also from Declan: With one week to go before the expiration of SEC relief dealing with a regulatory chasm between the U.S. and EU over how investors are billed for research, lawmakers are signing onto Wall Street’s pleas for more time. The latest: Sens. Jerry Moran (R-Kan.) and Bob Menendez (D-N.J.), who pressed SEC Chair Gary Gensler in a letter Monday to extend the looming July 3 expiry date by six months while studying the potential impact.

In the markets

Bull Run — The WSJ’s Eric Wallerstein and Gunjan Banerji: “Everyone wants a piece of the new bull market. Traders are piling into bullish options bets that would profit if the recent stock rally continues. There has been a flurry of trading tied to continued advances in everything from artificial-intelligence stocks to smaller, economically sensitive companies and regional banks.”

— Principal Asset Management’s Chief Global Strategist Seema Shah said in a note that the rally has been “driven by only a few companies across a narrow set of sectors, the broader market has a bad breadth problem.”

First in MM: The pessimist take — A new survey of institutional investors from Edelman Smithfield found an overwhelmingly negative outlook on investments in financial services businesses over the next 12 months. Executive teams are expected to face much greater scrutiny from activist investors and regulators — and more consolidation — during that period. Treasury Secretary Janet Yellen over the weekend said she expects to see more bank mergers after the sector faced turbulence earlier this year.

— Bloomberg’s Max Reyes and Lisa Lee: “PacWest Bancorp sold a $3.5 billion asset-backed loan portfolio to Ares Management Corp., the latest example of a bank seeking to improve liquidity by selling assets to private investment firms.”

Speaking of stimulus — Bloomberg’s Laura Litvan reports on how some Americans “are putting life decisions on hold as they await a Supreme Court ruling on President Joe Biden’s student debt relief plan, which would forgive up to $20,000 in loans per person.”

BlackRock’s private credit push — Bloomberg’s Silla Brush and Miles Weiss: “BlackRock Inc. is embarking on a crucial test of its ability to muscle into one of Wall Street’s most competitive growth areas — pitching private assets to small investors.”

Remember, Fink and other BlackRock leaders identified private credit as a major opportunity after Silicon Valley Bank’s demise rocked regional banks.

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