US: Politics to remain at the centre stage in Q3 - BBH

In the US, the investigations into Russia’s attempt to influence last November’s election will continue beyond Q3 and is likely to have impact on its economic well-being suggests the analysis team at BBH.

Key Quotes

“These will make for riveting headlines for a while, but barring a real bombshell, they will fade from leading the news cycle. Investors want reassurances that the investigation will not interfere with the economic agenda. At a bare minimum, the agenda must demonstrate it achieves the most basic goals: the debt ceiling must raise, and the spending authorization (expiring at the end of September) must be renewed, and preferably with as little fanfare as possible, but both President Trump and Treasury Secretary Mnuchin have talked about a “good” government shutdown.”

“Investors also need to be assured of the legislative acumen of the new administration. Rather than repeal and replace Dodd-Frank, there is increased speculation that it can be modified through executive orders and the exercise of regulatory discretion. The Senate will likely offer its own alternative to the Affordable Care Act, which will then have to be reconciled with the House version. In turn, the health care reform is seen helping fund the tax reform, for which progress also needs to happen.”

“US negotiations with Canada and Mexico to revise and modernize the North American Free Trade Agreement will begin around the middle of the third quarter. Suggestions that the negotiations can be completed before the end of the year seems too ambitious. Domestic content, which seems to be an important focus for the US, is a particularly thorny issue, and the closer one examines it the more complicated it appears.”