All markets have their eyes on the Georgia election: If Dems win, more stimulus can be counted

Outlook:

We get the ISM manufacturing PMI today, likely a downward number from Nov, according to Bloomberg, but following the Markit report of a gain to 57.1 from 56.5 in the flash and 56.5 the month before. Many analysts consider the ISM a more thorough review. A sideline bit of data is Dec auto sales, which may show peppy sentiment.

Not everyone will admit it, but all markets have their eyes on the Georgia election for the simple reason that if the Dems win, more stimulus can be counted on from the Biden team, and not just those $2000 per person checks. The new administration may call on a still-unspecified Plan B to get more vaccinations going, faster. We imagine the National Guard, but other options exist. Now oft-cited is the 1947 experience when New York City vaccinated 6.35 million persons against smallpox in two weeks. The US used to be the can-do place and it remains to be seen whether Pres Biden can resurrect that mindset.

In addition, Biden may accelerate infrastructure spending and green investment, maybe even public housing. Wall Street worries that the higher taxes to pay for all this will pour cold water on the stock market, but consult experience—equities will love new investment and rejigger portfolios even more. Note that the key industrial commodity, copper, is still going gangbusters.

At the same time, the departure of Trump will be celebrated far and wide. One effect will be the removal of the single biggest uncertainty—what stupid thing will he do next?—removing the single biggest source of risk that has supported the safe-haven dollar. Eventually, the restoration of growth might favor the dollar again for "good" reasons instead of negative ones, but that's down the road.

In the meanwhile, we need to get through the next two weeks and it's not inconceivable that Trump can upset the apple cart again. That is a diminishing prospect with every passing day and there are only 15 to go. It's interesting that all ten of still-living defense secretaries came out to warn Trump against doing anything with the military pertaining to the "peaceful" transfer of power. If Trump had sinister intentions, it's not clear they are nipped in the bud but they are sure harder to get going now.

So, the rest of the week may see some whipsawing based entirely on US political events, but we are inclined to side with the experts who say there is absolutely nothing Trump or the Republicans can do to prevent Biden/Harris from being inaugurated on Jan 20. It will be all noise. The signal remains "sell USD."

US Politics: The liberal press is as engaged in shocked response to Trump trying to strongarm Georgia into rigging the election as it was when the Ukraine story broke. Using the same mobster indirect language, Trump threatened the Georgia Secy of State as well as soliciting him to commit election fraud, parallel to threatening Ukraine with withholding weapons and soliciting the invention of dirt on Biden.

Legal experts say it is indeed a crime under Georgia law and Trump may be indicted after he leaves office; it's also a crime under federal law but we need to get a new attorney general to find out if a case would be pursued there. The federal prosecutor in the relevant district in Georgia resigned abruptly yesterday, apparently wanting nothing to do with Trump. No president has ever been charged with a state or federal crime while in office of after leaving it.

On a note of irony, Republican efforts coming tomorrow to object to the workings of the electoral college are falling straight into the arms of the Dems, who would prefer a nationwide direct vote, anyway. The electoral college benefits Republicans by overweighting small states; Wyoming gets a senator for every 40,000 in population while California gets a senator for 40 million.

With any luck, Trump is going to charged and soon with various crimes in New York State as well as New Jersey, Florida and now Georgia. He may try to pardon himself for federal crimes but cannot pardon himself for state crimes. Pres-elect Biden is not spoiling for a fight but a great many others are looking forward to it.

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