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After Biden Win, Nation’s Republicans Fear the Economy Ahead – The New York Times

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After Biden Win, Nation’s Republicans Fear the Economy Ahead

Polling shows that Republicans have turned bearish on the outlook for their family finances since the election, while Democratic optimism is rising.

  • Dec. 2, 2020, 5:00 a.m. ET

Optimism about the economy has taken a nosedive among Republicans. But the economy did not drive the change. The presidential election did.

After President Trump’s loss to former Vice President Joseph R. Biden Jr., more than 40 percent of Republicans who were polled for The New York Times said they expected their family to be worse off financially in a year’s time, up from 4 percent in October. Democrats expressed a rise in optimism — though not as sharp as the change in Republican sentiment.

The new polling, by the online research firm SurveyMonkey, reaffirms the degree to which Americans’ confidence in the economy’s path has become entwined with partisanship and ideology. In the days after the election, for the first time since Mr. Trump took office in 2017, Democrats and independent voters expressed higher levels of confidence in the economy than Republicans did.

Democrats in November were nearly three times as likely as they were in October to say they expected good or very good business conditions in the country over the next year. They were more than twice as likely as they were in October to say they expected “continuous good times economically over the next five years.”

Republicans were actually more likely to say that they were doing well in November, compared to October. But nearly three in four said they expected “periods of widespread unemployment or depression” in the next several years, up from three in 10 in October.

Nancy Veits, a Republican voter in Los Angeles County, said the economy was a major factor in her decision to vote for Mr. Trump. A retired small-business owner, Ms. Veits, 81, said that she appreciated the president’s commitment to deregulation — and that she feared for the economy after his departure.

“The economy was working,” she said. “I think that under Biden it’s going to be more difficult.”

David Keyston, a survey respondent in Waco, Texas, has a similar set of concerns. He runs his own nonprofit business distributing books about alternative health and healing. Business was good before the pandemic, he said, and has actually improved since the virus began to spread.

Mr. Keyston, 66, said that he didn’t like Mr. Trump’s penchant for Twitter or his demeanor in office. But he said he liked many of Mr. Trump’s policies, like his tax cuts and his promise to build a border wall and to keep the United States out of wars. And he said Mr. Trump had managed the economy well both before and during the pandemic.

“I think he’s tried under the circumstances to do the best he can to maintain some level of economic stability,” he said.

Now, Mr. Keyston’s outlook has turned more dour. He worries that Mr. Biden will impose new restrictions that will cripple the economy, including a nationwide lockdown, a charge that Mr. Trump repeatedly leveled against Mr. Biden, though Mr. Biden did not call for such a lockdown.

“A lockdown will kill this country,” Mr. Keyston said.

Big partisan shifts in confidence have become common following elections in recent decades. Republicans’ economic sentiment fell when Barack Obama was elected president in 2008, then soared when Mr. Trump was elected in 2016. Republicans’ self-reported confidence remained well above Democrats’ for the entire Trump administration, until the election caused the pattern to reverse again.

“It reflects what we’ve seen in the survey data the whole time, which is that everyone is tying their own political beliefs to their views of the economy,” said Laura Wronski, a research scientist for SurveyMonkey. “It’s just kind of crazy to see how entrenched these beliefs are.”

Democrats’ views of the economy have also shifted after elections, but generally less than Republicans’, a pattern that was particularly stark this year. Ms. Wronski said enthusiasm among Democrats might have been tempered because they did not see the election as an unmitigated victory.

Janet Garrow, a survey respondent in Seattle, said that she thought Mr. Biden would do a better job with the economy than Mr. Trump, but that she didn’t expect a quick rebound from the pandemic-induced recession.

“I think the economic impact is devastating, and it’s going to take people decades to recover,” she said.

A retired judge, Ms. Garrow, 67, said her own finances are stable. But she said the economy wasn’t working for many Americans even before the pandemic.

“There was a lot of stagnation,” she said. “Sure, you might have had a job, but did your wage or your salary go up with what your cost of living really was?”

Ms. Garrow, a Democrat, said she supported many of Mr. Biden’s signature policy proposals, such as raising taxes on the wealthy and making public colleges free to students from middle-class families.

Perhaps more surprising, some of Mr. Biden’s proposals earn support from Republican voters. More than four in 10 Republicans support raising taxes on people earning more than $400,000 a year. Three-quarters of Republicans support a proposal to guarantee paid sick leave to workers during the coronavirus pandemic.

Liberal economists with links to Mr. Biden say the results show the popularity of his plans and the challenges of reaching out to supporters of Mr. Trump whose economic hopes were low before he won the 2016 election.

“We live in a country where, for all of our lives, we have seen economic inequality increase — across incomes, across wealth, across firms,” said Heather Boushey, an economist whom Mr. Biden said on Monday he would name to his Council of Economic Advisers. “A lot of communities have been left behind. People have become frustrated.”

“One of the things about Donald Trump is he acknowledged that reality,” she said. “It would be important for people on both sides of the aisle to continue to acknowledge that.”

William Spriggs, the chief economist for the A.F.L.-C.I.O. labor federation, said that the polling reflected the “partisan politics” now embedded in economic confidence surveys, and that it offered a message to Mr. Biden on the importance of pushing for policies like paid leave that have attracted Republican opposition in Washington.

“We absolutely need it, on a zillion levels,” Mr. Spriggs said. “I think this is going to be the challenge for the administration — because things like this, which Americans understand are common sense, doesn’t mean it’s politically feasible. The Republicans who are in office thumb their nose at these polls. The issue is, will the administration take them on?”

George R. Hood, a survey respondent in northern Kentucky, said he identified as a political moderate, not a liberal. But he said the country needed to invest more in public health, education and other priorities, and he said it made sense to raise taxes on corporations and the wealthy in order to pay for that spending.

“I just don’t see the socioeconomic situation improving unless we’re willing to spend a little more money,” he said.

About the survey: The data in this article came from an online survey of 3,477 adults conducted by the polling firm SurveyMonkey from Nov. 9 to Nov. 15. The company selected respondents at random from the nearly three million people who take surveys on its platform each day. Responses were weighted to match the demographic profile of the population of the United States. The survey has a modeled error estimate (similar to a margin of error in a standard telephone poll) of plus or minus 2.5 percentage points, so differences of less than that amount are statistically insignificant.

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U.S. Dollar dips on improved risk appetite, traders eye jobs data

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By John McCrank

New York (Reuters) -The dollar dipped on Thursday, hitting its lowest point in three days, as global market risk appetite improved and traders looked forward to the April jobs report due on Friday for direction.

The number of Americans filing new claims for unemployment benefits fell below 500,000 last week for the first since the COVID-19 pandemic started more than a year ago, data showed, signalling the labor market recovery entered a new phase amid a booming economy.

The Dow Jones Industrial Average hit a record high, with financials and industrials rising following the jobless claims report.

While the U.S. economy has been gaining steam on the back of massive government stimulus and an improving health situation, Federal Reserve speakers on Wednesday downplayed the risks of higher inflation.

The U.S. dollar, which is regarded as a safehaven asset, declined against a basket of peer currencies and was last down 0.34% at 90.948.

“The outlook for the dollar by many right now that it’s going to be in the house of pain for quite some time,” because for the most part, the markets are convinced that the Fed has Treasury yields under control, said Edward Moya, senior market analyst at FX broker OANDA in New York.

Investors were looking forward to the closely watched non-farm payrolls report on Friday, with estimates of between 700,000 and more than 2 million jobs having been created in April.

If the number is north of 1.5 million, it could lead to a spike in Treasury yields that would provide some temporary support for the dollar, Moya said.

Elsewhere, the Bank of England said it would slow the pace of its bond-buying as it sharply increased its forecast for Britain’s economic growth this year after its coronavirus slump, but it stressed it was not tightening monetary policy.

“They said they are going to reduce the weekly pace of purchases, but that’s not a signal and so sterling has kind of gone up and down and done nothing at the end of the day,” said Erik Bregar, director and head of FX strategy at the Exchange Bank of Canada.

The pound was last down 0.15% against the weaker dollar at $1.3890 .

The euro was up 0.44% versus the dollar at $1.2058, and up 0.54% against the pound, at 0.8678 pence per euro.

Investors were also paying attention to elections in Scotland that could herald a political showdown over a new independence referendum.

The Canadian dollar hit a three-and-a-half year high against the greenback, helped by oil price gains and the Bank of Canada’s recent shift to more hawkish guidance.

“The Canadian dollar continues to have everything going for it fundamentally, technically, and if you look at intermarket correlations, so it’s been a tough trend to step in the way of,” said Bregar.

In cryptocurrencies, ether, the world’s second largest crypto currency after Bitcoin, hit a record high of $3,610.04.

Bitcoin declined 1.03% to $56,919.50.

The meme-based virtual currency Dogecoin soared on Wednesday to an all-time high, extending its 2021 rally to become the fourth-biggest digital coin.

(Reporting by John McCrank in New York; editing by Alistair Bell and Bernadette Baum)

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Canadian dollar seen consolidating gains as drumbeat builds for Fed taper

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar is expected to give back some of its recent gains over the coming year as the Bank of Canada‘s more hawkish stance is offset by potential dialing back of the U.S. Federal Reserve’s asset purchase program, a Reuters poll showed.

The median forecast of nearly 40 strategists in the May 3-5 poll was for the Canadian dollar to weaken 1% over the next three months to 1.24 per U.S. dollar, or 80.65 U.S. cents. It is then expected to trade at that same level in one year, compared to 1.23 seen in April’s poll.

“We think a lot of good news is in the price of the CAD, so we look for a little bit of tactical softening,” said Mazen Issa, senior FX strategist at TD Securities in New York.

The loonie has climbed 3.7% since the start of the year, the biggest gain among G10 currencies. On Wednesday, it touched its strongest intraday level since February 2018 at 1.2252.

The currency has been bolstered by higher prices for commodities such as oil, one of Canada‘s major exports, and an improved outlook for the domestic economy as the rollout of the COVID-19 vaccine gathers pace.

In addition, the Bank of Canada last month changed its guidance to show it could start raising its benchmark interest rate from a record low of 0.25% in late 2022. It also tapered its bond purchases, becoming the first major central bank to cut back on pandemic-era money-printing stimulus programs.

Analysts say the Federal Reserve could follow the BoC’s lead.

“We think that the odds are increasing that the Fed will have to acknowledge the strength in the U.S. economy and hint at a taper in late summer/early fall,” said George Davis, chief technical strategist at RBC Capital Markets.

“This would lead to a re-pricing in U.S. interest rate expectations that would be expected to boost the USD as the timing for U.S. rate hikes is brought forward.”

The U.S. central bank’s current guidance is to leave interest rates on hold until at least 2024.

Money markets expect two Bank of Canada rate hikes in 2022, as opposed to one from the Fed, reflecting the Canadian central bank’s more hawkish guidance, but past tightening cycles show that faster liftoff for the BoC may not be sustained.

“Things are not moving in isolation,” Issa said. “At the end of the day, FX is a relative game.”

(For other stories from the May Reuters foreign exchange poll:)

 

(Reporting by Fergal Smith; Polling by Sujith Pai and Nagamani L; Editing by Toby Chopra)

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Bank of England line up to taper emergency stimulus

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The Bank of England’s decision on Thursday to slow the pace of its bond-buying makes it the second central bank from a G7 economy to begin the slow exit from pandemic-era money-printing stimulus schemes.

The big three of central banking – the U.S. Federal Reserve, European Central Bank and the Bank of Japan – won’t officially pare stimulus for a while.

Yet there are growing signs that policymakers have their eyes on the exit as vaccine rollouts pick up and growth bounces back. The Bank of Canada‘s C$1 billion ($806 million) cut to its weekly bond-buying programme last month highlights the next phase is about slowing hefty asset purchases.

Bank of America estimates central bank asset purchases in the United States, Japan, the euro zone and Britain will slide to about $3.4 trillion this year from almost $9 trillion in 2020. For 2022, it predicts purchases of just $400 billion.

Here’s a look at who is tapering, who may raise interest rates and who might be the last to call time on pandemic-era monetary stimulus.

1/ NORWAY

Norges Bank is at the vanguard in terms of signalling a retreat, and said on Thursday it is on track to hike interest rates in the second half of 2021.

That has made the crown this year’s best performing G10 currency. The central bank doesn’t intervene in bond markets, so the taper debate is not applicable.

2/ CANADA

Having announced tapering, Canada has signalled that its key interest rate could rise from 0.25% late in 2022.

3/ BRITAIN

Flagging a stronger economic rebound, the BoE will slow bond-buying to 3.4 billion pounds ($4.7 billion) a week, from the 4.4 billion-pound current weekly pace.

However, it kept the total size of the bond-buying programme unchanged at 895 billion pounds and Governor Andrew Bailey said the move did not amount to tapering.

“Since the Bank has already purchased 70 billion pounds out of the 150 billion pounds in gilts to be purchased by the end of 2021, purchases were already set to naturally slow,” Ambrose Crofton, global market strategist at JPMorgan Asset Management, said.

 

For a graphic on British bond markets stable as BoE slows weekly bond buys:

https://fingfx.thomsonreuters.com/gfx/mkt/jbyvryljzpe/GB0605.png

 

4/ UNITED STATES

The Fed plans to keep borrowing costs near 0% and maintain monthly asset purchases worth $120 billion until it sees “substantial further progress” towards full employment and its 2% flexible inflation target.

But with the economy expected to grow by more than 6% this year and inflation to be a “little higher” – according to Fed boss Jerome Powell – markets are pricing in a rate rise in 2023. Many analysts expect tapering to start this year.

The Fed faces a delicate balancing act, ensuring that tapering at a time of massive U.S. government borrowing does not boost Treasury yields too much.

Pictet Wealth senior economist Thomas Costerg expects tapering to start by early 2022 and proceed at a monthly pace of $10 billion. That process would last about a year – “enough to keep expectations for the first rate hike well in the distance”, he added.

 

For a graphic on Central bank holdings of government bonds:

https://fingfx.thomsonreuters.com/gfx/mkt/yxmvjdwyevr/CBANKS2704.PNG

 

5/ SWEDEN

Swedish inflation is approaching the Riksbank’s 2% target but it has said interest rates would stay at 0% for years. However, its 700 billion crowns ($84 billion) asset purchase programme will wind down this year as planned.

6/ EURO ZONE

Anaemic long-term inflationary pressures mean euro area rates are unlikely to rise for years. But tapering may come sooner, especially within the European Central Bank‘s 1.85 trillion euro ($2.2 trillion) pandemic emergency purchase programme (PEPP).

Technically, this runs until March 2022 but some officials are already advocating reducing bond purchases as growth rebounds.

Danske Bank analysts reckon the ECB will end up using only 1.65 trillion euros of the total PEPP stimulus package.

 

For a graphic on ECB weekly PEPP purchases:

https://fingfx.thomsonreuters.com/gfx/mkt/jznpnrbeopl/ECB0605.PNG

 

7/ AUSTRALIA

Australia’s economic rebound has surpassed expectations but the Reserve Bank of Australia, which has underscored its dovish credentials by adopting yield curve control, could be among the last to tighten policy.

It wants unemployment slashed and inflation within its 2% to 3% target before shifting tack, and doesn’t see either happening until 2024. Economists expect rates to stay on hold until then.

The RBA’s A$100 billion ($77.45 billion) QE programme ends in September and it will consider in July whether to extend it.

8/ NEW ZEALAND

New Zealand’s strong recovery and red-hot property markets have raised speculation a rate rise may come sooner than expected.

While its key interest rate is expected to stay at 0.25% this year, some analysts predict a rise in the second half of 2022. The central bank meanwhile appears to be in no hurry to taper its NZ$100 billion ($72 billion) QE programme.

9/ JAPAN

The BOJ pledged last week to maintain stimulus using yield target control and via bonds and equity purchases.

It has been accused of “stealth tapering” because its bond-buying has slowed since yield curve control (YCC) was adopted in 2016, though purchases have picked up slightly in the past year.

In March, they were about 22.2 trillion yen ($204 billion)above levels a year ago. But that’s still a quarter of the 81.96 trillion yen year-on-year increase in August 2016, just before YCC came in.

 

For a graphic on BOJ steadily ‘stealth’ tapering its JGB buying:

https://graphics.reuters.com/GLOBAL-CENTRALBANKS/TAPER/bdwpkbmllvm/chart.png

 

10/ SWITZERLAND

The Swiss National Bank does not intervene in domestic bond markets, instead capping the Swiss franc through interventions which came to nearly 110 billion francs ($120 billion) in 2020. The proceeds are used to purchase foreign bonds and equities.

The SNB shows no signs of departing from its interventionist policy; its chairman Thomas Jordan said last week that negative rates and a readiness to intervene in currency markets remain “essential”.

 

(Reporting by Sujata Rao, Tommy Wilkes, Saikat Chatterjee and Dhara Ranasinghe in London and Leika Kihara and Daniel Leussink in Tokyo; Editing by Toby Chopra)

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