RETURNING TO REGULAR ORDER: The House passed the eight remaining Appropriations Bills in regular order, passing them before the fiscal year ends for the first time since 2009. They previously passed the four defense-related bills in one minibus in July. The package, which appropriates $621.5 billion for defense spending and $511 billion for nondefense spending, will be sent to the Senate checking off a major item on their fall agenda. The Senate now has until December 8th to pass the Bills before the continued resolution for government spending expires.
SUNSET FOR NAFTA?: The Office of the U.S. Trade Representative (USTR) is floating the idea of introducing a sunset date for the NAFTA agreement. The provision would essentially terminate the deal after five years unless all three countries agree to renew it. Other officials who are heavily impacted by the deal have expressed strong concerns. For starters, the U.S. Department of Agriculture believes a sunset date would deny them the stability trade deals are supposed to ensure, scaring off investments. And, the State Department is worried about the legal processes for future negotiations if the deal were to terminate every five years. The third round of NAFTA talks is a week away and negotiators are expected to get into the controversial provisions they haven’t made progress on to date. Ottawa here we come.
FENCING OUT CHINESE DEALS: President Trump’s qualms with China’s trade practices have not dissipated, and the investigation into whether they are taking U.S. intellectual property is in full force. Despite Lattice Semiconductor Corporation (LSCC) offering a mitigation proposal to satisfy the Committee on Foreign Investments in the U.S (CFIUS), Trump followed a recommendation from CFIUS and prohibited the sale of Lattice to a Chinese venture capital fund in the name of national security. Considering the lengths Lattice claims to have gone to, “maximize U.S. national security protection... and double American jobs," we wonder what other Chinese deals in the CFIUS pipeline will be stopped over potential intellectual property theft as part of Trump’s larger crackdown on Chinese trade.
HOW WE MODEL THE U.S. ECONOMY: Our Growth, Inflation, Policy (GIP) model is “the hallmark of our fundamental research process,” says Hedgeye Senior Macro analyst Darius Dale in this brief video explaining our macro process. We find two factors to be most consequential in forecasting future financial market returns: economic growth and inflation. After determining whether growth and inflation are heating up (or cooling down), we can select asset classes that perform best in each environment based on our historical back-tests. “When growth is accelerating and inflation is slowing, that has historically been really positive for both equity and credit data across all sectors of the U.S. economy,” Dale says. That’s precisely the environment our GIP model forecasts for the U.S. economy through early 2018. Click here to watch the brief video in which Dale explains our model.
WAIVE AND SLAP: Tensions between Iran and U.S. officials are rising as President Trump and Secretary of State Rex Tillerson have been criticizing them for not following the Iran nuclear deal. However, the president decided to extend sanction relief for Iran - preventing the deal from imploding. The Administration pulled a “waive and slap,” where they waived nuclear sanctions while slapping on sanctions to 11 Iranian people and companies. The new sanctions were for their involvement in ballistic missile programs and cyberattacks on the U.S. All of this comes days after the House voted to block aircraft sales to Iran, despite warnings it would undermine the Iran nuclear deal.
CALL INVITE | DISH NETWORK (DISH): Our Senior Telecom and Cable Analyst Paul Glenchur is hosting a call discussing the regulatory outlook and agenda for Dish Network with its Senior VP and Deputy Counsel, Jeff Blum, September 20th at 11am. Get the dial-in here.
HCA, HOLX, MD, AMN, ATHN | HEALTH CARE JOB OPENINGS +5.6% IN JULY: Our Senior Health Policy Analyst Emily Evans writes we remain short a number of names in the Hedgeye Health Care Position Monitor related to our #ACATaper thesis. Read the full piece here.
EVENT: DEPUTY ENERGY SECRETARY & FORMER OPEC PRESIDENT HEADLINE OCT 11 HEDGEYE ENERGY CONF (NYC) Our Senior Energy Analyst Joe McMonigle is hosting a Hedgeye energy conference in New York City. Topics include regulating pipelines, grid reliability and energy infrastructure in the Trump Administration - as well as an OPEC meeting preview. Get the event details here.
