Let us move from the era of confrontation to the era of negotiation.
- Richard Nixon
PRESIDENTIAL PROBE: After rallying against voter fraud for months, President Trump is finally taking action. By calling for a major investigation into voter fraud, we will once and for all know whether his claims are substantiated or if it’s just rhetoric. This could be dangerous for the president as he claims to have evidence of massive fraud - and a months long investigation will distract from what Republicans think are the key issues. Having said that, he gained an ally in Speaker Paul Ryan who at first said there was no evidence of voter fraud, and is now backing the president's efforts to investigate. Wonder what would happen if said investigation turns up fraud in battleground states Trump won?
WHO WILL BLINK FIRST?: In an effort to continue the momentum on following through on campaign promises, the Trump Administration is looking to tackle tax reform in the coming months - and is looking to cut tax rates without the spending offsets to make it revenue neutral. This flies in the face of Ways and Means Committee Chair Kevin Brady and House Republicans whose blueprint is to not add to the federal deficit in the long run. In order to get his version passed in Congress, the president will need substantial help from Democrats to clear the Senate, making the idea unworkable.
FUEL TO THE FIRE: Since the election of President Trump, the U.S.-China relationship has quickly heated up. Trump’s meeting with the President of Taiwan and Secretary Rex Tillerson’s promise to block China’s access to the disputed Asian islands rubbed China the wrong way. The Chinese Foreign Ministry has pushed back and even issued a veiled threat to the U.S. over its stance on the One China Policy. Throw in Dem (Chuck Schumer) support for Trump’s campaign pledge to label China a currency manipulator into the mix and, well, the real fireworks may begin sooner than later.
REPUBLICAN’S RETREAT: After weeks of anticipation and planning, the Republican retreat is underway in Philly. Speaker Ryan and Majority Leader McConnell outlined their ambitious 200-day plan, looking to put the final touches on ACA repeal and replace (April), map out tax reform (August) and finance the border wall. British PM Theresa May is scheduled to speak to the restive Republicans today and a meeting with President Trump will rally the troops behind his plans for his first 100 days.
WE’RE MORE BULLISH THAN THE FED – As Hedgeye CEO Keith McCullough recently wrote, since Election Day, investors have ridden a historic wave of optimism. Inflation and formerly recessionary sectors of the U.S. economy, like manufacturing, are accelerating once again. Last week, the Consumer Price Index hit +2.1% year-over-year growth, ending 30 months south of the Fed's 2% inflation target. Industrial Production broke a 15-month streak of negative growth, with a reading of +0.5% year-over-year. This Friday, we expect fourth quarter GDP to be 2.91% (quarter-over-quarter). This compares with 2.2% for Wall Street consensus and 2.8% for the Atlanta Fed's GDP tracker. In other words, we’re more bullish on the U.S. economy than the Fed!
CONGRESSIONAL LEADERS MAY BE ONTO FISHY MEDICAID ENROLLMENT: Our Senior Health Analyst Emily Evans writes that before the holidays a bicameral letter went out to CMS that suggests Congress thinks the growth in Medicaid enrollment needs a closer look. You can read the full analysis here.
