DEJA VU ALL OVER AGAIN: House Budget Chair Diane Black (R-TN) cajoled the competing factions of her Committee enough to move the FY18 budget (originally due on April 15) bill to the full House, but that is only a down payment - Black and Speaker Ryan are now being squeezed by moderates and conservatives the way Senate Majority Leader Mitch McConnell currently is on health care. Rinse and Repeat. House Ways and Means Chair Kevin Brady (R-TX) is pushing Republicans to get on board given the lack of victories heading into the August recess saying, “this budget resolution gives us the green light to move forward with tax reform” and so much more in our view as this is yet another critical test for leadership - which hasn’t held a major vote since health care back in May.
'NOBODY KNEW HEALTH CARE COULD BE SO COMPLICATED': Senate Republicans are no closer to passing a replacement for Obamacare despite last ditch efforts from the most irresolute Senators. Everyone wants to get to yes, they just want to get there in very different ways. The CBO came out with their new score on the Better Care Reconciliation Act, which will leave an additional 22 million people uninsured, adding fuel to the moderate fire. Senate Majority Leader Mitch McConnell and President Trump are still pushing for action before August recess, likely adding more money for Medicaid to appease moderates and governors, and rolling back regulations for conservatives. It's anyone's guess. Our Senior Health Policy Analyst Emily Evans is closely following the bill. Read her latest missive here.
A REAL STEEL: President Trump is even closer to putting a tariff or quota on Chinese steel despite opposition from his own advisors who are worried about the effects on industries, upsetting our allies, sparking retaliatory action - or worse starting a trade war. Commerce Secretary Wilbur Ross reportedly said that the Administration hoped a threat of such harsh action would bring China to the negotiating table; however, President Trump’s talk with the Chinese government about reducing their flood of steel into the market was unsuccessful. The news sent steel stocks plummeting, out of fear that Trump’s action would inadvertently skyrocket the price of the commodity, all the while hurting industries that rely on cheap steal to make their products.
BEAR AND BARREL: Energy lobbyists have been putting a lot of wear and tear on their Gucci loafers this week, hoping to remove a provision from the Russia sanctions bill that could sabotage U.S. oil companies’ global deals. The House is removing it, but keeping another contentious part of the Senate bill, one that specifically lessens the Administration’s flexibility in dealing with Russia. This draws a line in the sand for the Administration, and we hear some House Republicans are chomping at the bit to overturn his veto should he dare test their seriousness on Russia; however, the bill still has to go back to the Senate before reaching the president’s desk. Our Senior Energy Analyst Joe McMonigle wrote about the revised bill. Read his full piece here.
THE EARNINGS SCORECARD: It’s early, so don’t break out the champagne just yet. But if the current data holds, corporate America will realize yet another quarter of strong profits. So far, 59 of S&P 500 companies have reported aggregate sales and earnings growth of +4.8% and +9.4% year-over-year for the second quarter of 2017, as tracked by the Hedgeye Macro team. This bolsters our U.S. #GrowthAccelerating call. Recall this trend of profits accelerating comes after five consecutive quarters of negative year-over-year profit growth from the second quarter of 2015 to the second quarter of 2016. Over that period, the U.S. economy peaked at 3.3% year-over-year growth (in 1Q15) and slid to 1.3% by the second quarter of 2016. GDP has since rebounded to 2.1% year-over-year growth in the first quarter of 2017. We see it accelerating into early 2018. As you can see in the chart below, earnings have snapped back too. Good news, stock market bulls. Okay, now you can break out the champagne.
SENATE APPROPRIATORS THROW COLD WATER ON DEFENSE LARGESSE: Our Senior Defense Analyst Emo Gardner writes that the Senate Appropriators intend to mark PresBud 18 to BCA levels = FY17, $61B less than the three other Congressional committees. To find out more, read the entire piece here.
REPLAY | QUARTERLY POLICY THEMES CALL: We had roundtable conversation with our policy team on major policy issues developing in Washington. If you missed the event, get the replay here.
REPLAY | DRUG PRICING AND APPROVAL POLICY - IT'S A NEW DAY: Our Senior Health Policy Analyst Emily Evans gave a rundown of all the major drug pricing and policy trends at the state and federal level including 340B and generics approval. Listen to the replay here.
VENEZUELA POLITICAL UPDATE AND POTENTIAL U.S. ENERGY SANCTIONS: Our Senior Energy Analyst Joe McMonigle wrote about what the Trump Administration might do in Venezuela here and hosted a flash call with Dr. Francisco Monaldi, a Fellow in the Latin American Initiative & Energy Economics at the Baker Institute at Rice University, listen to the replay here.
