YOU CAN’T ALWAYS GET WHAT YOU WANT: Senate Majority Leader Mitch McConnell is trying to give everyone a little bit of what they want - he added the controversial Cruz amendment to appease conservatives and, for moderate balance, he added more money to fight the opioid crisis and support low-income patients’ insurance; but there are still a lot of loose ends and McConnell has no wiggle room. His immediate goal is to get past the procedural vote, then rework and amend the bill. Senators Lindsey Graham (R-SC) and Bill Cassidy (R-LA) have already started working on an amendment that would move Obamacare federal funding directly to the States - but that may be a backup plan if McConnell’s efforts fail. Majority Whip John Cornyn (R-TX) continues to toe the leadership line “if you vote ‘no’ on this bill, it essentially is a vote for Obamacare because that’s what we’re going to be left with” and it may be their best selling point - not many Republican Senators want that attached to their name. Our Senior Health Policy Analyst Emily Evans wrote about the future of the bill, get her insight here.
ADVANCING APPROPRIATIONS: Delayed top-down budget numbers from committee chairmen has the House Appropriations Committee working without a FY18 budget. Out of the spotlight, they’ve prepared all 12 of the Appropriations bills with the intent to vote on them before the August recess. If the Republican leadership doesn’t tackle FY18 before September 30th, they’ll have shutdown hysteria to deal with and more critical to their agenda, they’d lose their vehicle for tax reform. There are bound to be hiccups with spending numbers being higher than Congressional budget caps, but as of now the only piece sparking real debate is funding for the border wall. Here’s what we know the House is moving so far:
“VERY LIKELY”: President Trump is due to report to Congress (through the State Department) Iran‘s compliance with the Obama-era Iranian nuclear deal. According to a White House senior official, he is “very likely” to certify they are complying, but the president is known for being unpredictable. As long as Iran is complying, sanctions can’t be increased on the country, something some Republican members of Congress are pushing for the ability to do. They would need Trump to break the deal in order to sanction their oil and natural gas production, which has contributed to a market glut and is driving down prices. Our Senior Energy Analyst Joe McMonigle, wrote on the impact of Russian sanctions to the energy industry, get the full piece here.
SLOW-MOVING DEMOGRAPHIC DISASTER IN EUROPE: Hedgeye’s Macro Team recently hosted our three highly-anticipated Q3 2017 Macro Themes (see 6/30 Capital Brief for the themes’ overview). This 85-page presentation lays out the market trends we think are most underappreciated by investors. Among them? #EuropeSlowing. Beyond the coming deceleration in European growth and inflation, there is a more subtle reality brewing beneath the surface of Europe. The continent’s 35-54 year old population, that demographic cohort so critical to consumption, is declining. Fast. As Hedgeye Macro analyst Ben Ryan points out, the problem is particularly troubling for Spain, Portugal, Greece and Italy. “The estimated growth rates in this peak spending cohort for these four economies will hit -2.5%, -2.3%, -1.8%, and -1.6% year-over-year by 2030, respectively – a complete disaster on the surface," Ryan writes (see chart below). For the Eurozone as a whole, the growth rate of 35-54 year olds by 2030 will reach an estimated -0.7% year-over-year. This compares to +1.0% year-over-year in the U.S., thanks to a lift from the rising Millennial generation. In other words, Europe has the combined problem of slowing economic growth and a greying population. Not exactly a recipe for success.
TRUMP v. NAFTA: The Trump Administration is expected to announce their guidelines for the modernization of the NAFTA next Monday, with negotiations beginning on August 16th. We hosted a call with John Murphy, the Senior Vice President for International Affairs at the U.S. Chamber of Commerce, to discuss the key issues and impacts of the deal. Mr. Murphy emphasized that many U.S. businesses have expressed support of the NAFTA during the Administration’s comment period, considering it helps provide about 14 million jobs across many sectors of business: including automotive, industry, energy and agriculture. While the U.S. is looking at the NAFTA from a political lens, Mexico is looking at it through a trade policy lens, and that may complicate efforts in the coming months. Listen to the full replay here.
CALL INVITE | QUARTERLY POLICY THEMES CALL - JULY 19: We will be hosting our Quarterly Policy Themes Call on Wednesday, July 19th at 3:00PM ET. Join us for an in-depth conversation with our policy team as they provide insight on major policy issues developing in Washington. Get the dial-in details here.
CALL INVITE | DRUG PRICING AND APPROVAL POLICY - IT'S A NEW DAY (JULY 20th @ 11:00 AM ET): Our Senior Health Policy Analyst Emily Evans is hosting a call. Join her for a rundown of all the major drug pricing and policy trends at the state and federal level including 340B and generics approval. Get the event details here.
REMEMBER IPAB? 2017 MIGHT BE THE YEAR (BUT IT PROBABLY WON’T MATTER MUCH): Our Senior Health Policy Analyst Emily Evans writes the data seems to point to an IPAB trigger this year but we expect impact will be minimized as much as possible. Read the full piece here.
OPEC LOOKS TO FIX LEAKY CEILING WITH LIBYA/NIGERIA PRODUCTION CURBS: Our Senior Energy Analyst Joseph McMonigle writes exemptions for Libya and Nigeria have undermined OPEC deal by adding 800K B/D in new production. OPEC committee will meet July 24 in Russia. Get the full piece here.
