“When you can't make them see the light, make them feel the heat.”
- Ronald Reagan
TRUMP’S TRICKY TRANSITION: Donald Trump and company are downplaying the apparent shift from his mainstay stance on immigration even after he gave yet another indication that his once-hardline position is undergoing significant changes. Understandably, nothing is concrete until we get a policy speech or see pen to paper, but to shift this late in the game is befuddling. He insists his plan will force undocumented immigrants to pay back-taxes, and does not include amnesty, but will “work with them.” Sounds a lot like the comprehensive immigration reform bill that was under consideration in the Senate in 2013. His camp continues to argue that Trump isn't abandoning any position, he’s just using different words - and that Trump’s shift is distinguishably different from the Senate bill, which Trump used to attack Senator Marco Rubio during the primaries. Watch for Trump to lay out his exact plan over the next week.
CALI GOLD RUSH: Trump may be hitting his base hard in southern states, but he’s certainly not making out like Hillary Clinton – she’s raised over $19 million during a three-day, nine fundraiser swing through CA this week. Her strategy is crafty as well - the fundraisers are designed to keep her from the public eye (progressives too) during a series of negative stories regarding the Clinton Foundation and emails she failed to turn over to the State Department. But ultimately, Trump’s July fundraising numbers served as a wakeup call for Clinton supporters, and roused her west coast enthusiasts. Proceeds will benefit the Hillary Victory Fund, a fundraising account that allows the whole Democratic ticket to raise money for her campaign - the DNC and Democratic state parties all at the same time. If Trump wants to remain competitive in the fundraising department, he needs to pool all resources available like she has…and fast.
DOL DELIVERS RETIREMENT RULE: Despite growing opposition from the financial services industry, the Labor Department released a final rule to make it easier for states to create retirement programs for private-sector workers whose employers don't offer one. The rule helps states develop payroll deduction IRA plans that don’t run afoul of the Employee Retirement Income Security Act. As of now, eight states have created their own plans, and some require some employers to automatically enroll workers if they don't offer their own plans. On top of that, the DOL is also proposing a rule that would allow some large cities to follow suit.
VIVA LA REVOLUCION: Bernie Sanders is back in the spotlight again after launching his highly anticipated post-primary movement, “Our Revolution.” His movement is based on values on which his presidential campaign thrived - move the center of American politics to the left. The movement further helps him establish a backing to support a slew of candidates and key initiatives around the nation and in down-ballot races. But at a time when Clinton is in need of party unity, Sanders is nowhere to be found - he failed to mention her name once in his address.
SENATE SUSPENSE: The word “volatile” doesn’t even begin to describe the fight for the Senate majority this year, as the current Republican lead of 54 seats to 46 seats may soon be diminished. Democrats need a net gain of four seats if they retain the White House (the incoming veep would break the tie in that event) and five seats if Republicans win the presidential race. The best outcome for Republicans would be a scant 51-49 majority, and the worst case would give Democrats an edge of 52 to 48. In short, the Senate may end up tied 50-50. Two hotly-contested seats to watch are held by Republican incumbents: Senators Kelly Ayotte (NH), and Pat Toomey (PA) who are both trailing by 1-3 points. IN will also be a nail-biter, where an open Republican seat is up for grabs, and former Democratic Senator Evan Bayh is leading in his comeback quest.
DÉJÀ VU ALL OVER AGAIN?: What happens if the Fed raises rates? Our view is they would be tightening monetary policy into an economic slowdown. What does that mean for markets? Well, yields at the short-end of the Treasury curve should go up. Meanwhile, because U.S. growth is slowing, yields at the long-end of the curve should go down. In other words, the 10yr/2yr Treasury yield spread compresses. That would hurt bank profitability. So expect bank stocks to take a hit. Another market bugaboo to watch: Tightening monetary policy would likely cause the U.S. dollar to go up, inducing commodity deflation (oil in particular) and debts priced in dollars. This is what happened in December when the Fed first hiked rates and stocks sold off significantly. Remain vigilant.
NOTE: We’re taking a publishing break next week, but will be available should you have any questions or just need therapy resulting from the long, hot political summer. Back the week of Labor Day.