RELIEF TO COME: Following the president's request, the House Appropriations Committee passed an emergency funding bill for $36.5 billion that is expected to be voted on in the full House as early as today. The bill will aid in the relief efforts from Hurricanes Harvey, Irma, and Maria and now the wildfires in the west. Despite the $16 billion for the National Flood Insurance Program and a provision helping low-income Puerto Ricans seek emergency nutrition - the territory needs more help. The Governor of Puerto Rico, with the support of President Trump, has asked Congress for a $4.9 billion loan as a recovery down payment, though many think the Governor should have requested more to use as a stimulus package for the ravaged and indebted region.
THE U.S. ECONOMY IS ACCELERATING: Take a look at the simple chart below. Growth slowed five straight quarters from +3.8% in 1Q 2015 to +1.2% in 2Q 2016. Growth then accelerated off its 2Q 2016 low to +2.2% by 2Q 2017. What should be surprising to no one is that #SlowGrowth exposures (Quads 3 and 4 in our model) outperformed materially during the first period, while #GrowthAccelerating exposures (Quads 1 and 2) outperformed significantly during the 2nd period, writes U.S. Macro analyst Christian Drake. Bottom line? If you get the big economic trends right, then you’ll get most of the big sector and style factor allocations right. Click here to watch a brief video on how we model the U.S. economy (explaining the four Quads) and select our investment conclusions.
KEEP ON TRUCKIN’: The trucking industry was a vital supporter of President Trump’s election and now he is back with a tax reform plan to tout to them. The rally yesterday in Pennsylvania focused almost exclusively on truckers and how tax reform will help the middle class. Trump claims that provisions such as lowering the corporate rate, changing the structure of pass-through businesses, and lowering individual tax brackets will lead to a typical household having $4,000 more in income. Senator Bob Casey (D-PA) disagrees. As some Democrats have, he did not attend the rally, but did continuously tweet that this is a partisan plan squarely focused on cutting taxes for the mega-rich.
CALIFORNIA PRICES: California became the newest state to regulate drug pricing, something Washington has been slow to do. California's new legislation targets drug manufacturers who raise their prices by more than 16% within two years. They will have to justify such cost increases, but they are not the first state to do this. Vermont, Maryland, and Nevada have laws aimed at transparency in prescription drug pricing. One of the roots of rising health care cost is a patient’s lack of choice - they rarely have options when prescribed medicine and seldom are able to compare prices. Critics of California’s new law say the middlemen are diluting transparency and this bill does nothing to address insurance companies or pharmacy benefit managers who take a large role in beefing up the price of prescription drugs.
NOW THE HARD PART: The fourth round of NAFTA negotiations are bringing forward some of the most controversial provisions that have yet to be addressed. Automotive rules of origin, investor-state dispute settlements, a sunset date on NAFTA, poultry access, and the trade remedy disputes provision will all be discussed in the coming days - and it’s unclear how much room the countries have to negotiate on the matters. Canadian Foreign Minister Chrystia Freeland and PM Justin Trudeau are in Washington for trade talks before heading to Mexico and then returning for the extension of NAFTA negotiations.
ARMY TO EMPHASIZE MODERNIZATION OVER GROWTH; ANNOUNCES SIX PRIORITIES: Our Senior Defense Analyst Emo Gardner writes that Army leadership streamlines its modernization bureaucracy; intends to trade size for modernity and lethality. Read the full piece here.
TRUMP’S POWER POLITICS: EPA REPEAL OF OBAMA CARBON RULE AND DOE PROPOSAL TO AID COAL/NUCLEAR: Our Senior Energy Analyst Joe McMonigle writes - the EPA issued notice of repeal for Obama's Clean Power Plan while DOE urges FERC to compensate coal and nuclear generation for grid reliability. Read the full piece here.
SENATE DEMS TARGET T-MOBILE/SPRINT (TMUS, S, T, VZ): Our Senior Telecom Analyst Paul Glenchur writes Senate Democrats want the DOJ and FCC to prep now for the coming deal, but Capitol Hill influence on deal review is limited. Read the full piece here.
EVENT | 4Q 2017 HEALTH CARE THEMES: Our Senior Health Analyst Emily Evans invites you to watch live here.
