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Trump's State of Union seeks shift from impeachment to economy –



President Donald Trump plans to use Tuesday’s State of the Union address to try to move past his impeachment and make his case for re-election by taking credit for a strong economy, newly signed trade deals and a crackdown on immigration.

Trump said he plans to deliver a “positive” speech — boasting of his achievements in front of an audience that will include as many as five of his potential 2020 opponents — at a time when he has been fuming at Democrats over his impeachment.

Some of Trump’s GOP allies are urging him not to use his prime-time address to air grievances with Democrats over an impeachment that originated with a near party-line vote in the House and likely will end on Wednesday with an acquittal in the GOP-controlled Senate.

“Why should he talk about impeachment when we have the hottest economy in history?” Senator Mike Braun, an Indiana Republican, said.

It is the second straight year Trump will deliver his address to the nation beset by a major political crisis. The president was forced to postpone last year’s speech due to a record-long government shutdown that stemmed from a fierce battle with congressional Democrats over his demand for money to build a wall along the U.S. border with Mexico.

The speech comes a day after the Iowa caucuses, the first contest in the race for the Democratic nomination for president. Trump has sought to elbow Democrats out of the limelight by holding rallies in the region and sending surrogates to campaign in the state.

Trump will make the central theme of Tuesday’s speech what he calls the “Great American Comeback,” according to a senior administration official who previewed the speech for reporters.

‘Head-On Kind of Guy’

The president plans to address the economy and trade deals with China, Canada and Mexico, the official said, which would echo key themes he uses in campaign rallies. He’ll also discuss his efforts to crack down on illegal immigration and lower prescription drug prices.

Trump has sought to motivate his supporters and raise money by railing against Democrats over impeachment. But the administration official didn’t say whether Trump plans to bring it up in the speech.

“There’s plenty to talk about and it’s an opportunity to move on,” said Senator Roy Blunt, a Missouri Republican. “But the other option is to address it head-on and he often is a head-on kind of guy.”

Trump must also decide whether to use the speech to signal that he wants to work with Democrats to pass legislation in the coming months. The president on Sunday said impeachment makes it difficult to work with the Democratic leaders, House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer.

“I’d like to, but it’s pretty hard when you think about it because it’s been such — I use the word ‘witch hunt,’ I use the word ‘hoax,’” Trump said in an interview with Fox News host Sean Hannity.

The address is expected to be relatively light on new policy announcements, a tacit acknowledgment of how difficult bipartisan cooperation will be in an election year.

White House officials have been drafting the speech for weeks, though the official said the president has the final say and that last minute changes could be made.

Senior White House adviser Stephen Miller and Joe Grogan, director of the Domestic Policy Council, both traveled with the president to his Mar-a-Lago resort in Palm Beach, Florida, last weekend to work on the speech, according to a person familiar with the matter.

Trump’s acquittal in the impeachment trial became all but guaranteed on Friday after senators voted against having witnesses to testify about the president’s alleged effort to pressure Ukraine to investigate former Vice President Joe Biden, a top contender for the 2020 Democratic presidential nomination, and his son Hunter, over their dealings in the Eastern European country.

Partisan Rift

The outcome has left members of both parties even more divided, with Democrats accusing Republican senators of conducting an unfair trial by blocking witnesses and documents. Several Republicans have said while they don’t condone Trump’s conduct, they also do not view it as impeachable.

Five Democrats who are vying for their party’s presidential nomination to run against Trump are lawmakers and could be present in the House chamber for his address: Senator Elizabeth Warren, Senator Bernie Sanders, Senator Amy Klobuchar, Senator Michael Bennet and Representative Tulsi Gabbard.

Past presidents have made a call for unity in their addresses to the nation. Trump used his 2019 State of the Union to inflate his economic achievements and tout numbers that didn’t match up with official data.

Polls show the economy is a bright spot for the president. A Washington Post/ABC News poll released late last month showed 56 per cent of Americans approve of the president’s handling of the economy, up 10 percentage points since September to a high for Trump’s presidency.

In his Sunday interview, Trump said low unemployment and declining poverty among racial and ethnic minorities has created a “positive revolution.”

“I don’t know how anybody could possibly beat me with that vote,” he said.

Trump will attribute the strong economic indicators to “phase one” of a trade deal with China and a revamped trade pact with Mexico and Canada, the official said, as well as other initiatives.

Trump will make specific requests for Congress to act on health care, according to the official. Trump has long spoken about working with congressional Democrats to lower the price of prescription drugs, but the two sides have disagreed on how to achieve that goal.

The White House last year threatened to veto a House-passed proposal that would require the government to negotiate drug prices for Medicare and other insurance plans. It has thrown its support behind a bipartisan Senate bill that also has little chance of becoming law.

–With assistance from Jennifer Jacobs, Laura Davison and Daniel Flatley.

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Japan's Economy Recovers Pre-Pandemic Size on Consumption Gain – Financial Post



The world’s third largest economy recovered to its pre-pandemic size in the second quarter, as consumer spending picked up following the end of coronavirus curbs on businesses.

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(Bloomberg) — The world’s third largest economy recovered to its pre-pandemic size in the second quarter, as consumer spending picked up following the end of coronavirus curbs on businesses. 

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Gross domestic product grew at an annualized pace of 2.2% in the second quarter of this year, coming in below the median estimate of 2.6%, Cabinet Office data showed Monday. That lifted the size of the economy to 542.1 trillion yen ($4.1 trillion), above what it was at the end of 2019. First quarter GDP was revised to an expansion from a prior contraction.

“The economy managed to return to its pre-pandemic size, but its recovery pace has been slower than other nations,” said economist Takeshi Minami at Norinchukin Research Institute. “I expect growth to continue in the third quarter too, but it will likely be losing momentum down the road.”

The end of pandemic restrictions on businesses in late March helped spur the economy. Consumer spending, which accounts for more than half of Japan’s economic output, led the growth, as did capital expenditure. The relaxing of Covid rules resulted in increased spending at restaurants and hotels, as well as on clothes, according to the Cabinet Office.

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Still, the gains were more limited than expected a few months ago, showing that pent-up demand among consumers has been moderate. 

What Bloomberg Economics Says…

“Going forward, we expect growth to slow in 3Q. Persistent cost-push inflation and a surge in new Covid-19 cases point to downside risks to the recovery. These will probably outweigh any boost from inventory rebuilding.”

— Yuki Masujima, economist

For the full report, click here.

While the economy regained its pre-pandemic size, economists expect the central bank to stick to its current easing policy, and the government to continue providing support for households hit by both the pandemic and rising prices. Other developed economies are doing the opposite by raising interest rates to cool demand and rampant inflation.  

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Japan’s milestone also comes behind the US’s, which recovered its pre-pandemic economy size a year ago, while much of Europe regained it at the end of 2021.

The report came out as downside risks mount at home and abroad. Japan has been reporting record Covid infection cases with daily numbers continuing to top 200,000 this month. The government has so far kept economic activity as normal as possible without bringing back restrictions. But high-frequency data suggest people’s mobility is falling. 

In Japan’s key trading partners, growth is slowing as the US and Europe fight inflation and China sticks to its zero-Covid policy. The war in Ukraine continues to disrupt food and energy supplies while the crisis in Taiwan is adding to geopolitical risks. 

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Inflation remains relatively moderate in Japan, but consumption may cool with prices rising faster than wages. After factoring in inflation, paychecks in Japan have been falling for three months in a row through June. 

Prime Minister Fumio Kishida reshuffled his cabinet last week but signaled that the core parts of his policies will remain the same. Kishida also suggested he’ll remain flexible on fiscal support, although he’ll focus on spending existing reserve funds first before reaching for additional debt issuance. 

Japan Kishida Orders Continued Wheat Prices Cap, More Grants (1)

Kishida ordered Monday another set of measures to contain inflation by early September, with a boost in funding for regional governments and a continued cap on imported wheat prices. He emphasized that wage gains need to be sustained, while saying that the additional support measures will concentrate on food, regional grants and energy. 

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For now, the measures will be supported by existing reserve funds, though Kishida said he’ll remain flexible in his approach.

“Inflation can cool consumption, although oil prices may stabilize with the global economy slowing down,” said Norinchukin’s Minami. “As downside risks mount in the world economy, there’s a risk that Japan’s economy could contract at some stage toward the end of the year.”

Bank of Japan Governor Haruhiko Kuroda has repeatedly said that the central bank must retain its easing program to support the economy until inflation becomes sustainable. He’s still seeking healthy wage gains, and price rises that go beyond a boom in commodities. 

So far, economists expect growth in Japan to remain moderate for the rest of the year, slowing as the months progress. For the third quarter, analysts expect annualized gains of 3.2%. 

(Updates with more details on additional price relief measures)



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China’s economy slows unexpectedly as Covid outbreaks and property crisis bite – The Guardian



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  1. China’s economy slows unexpectedly as Covid outbreaks and property crisis bite  The Guardian
  2. China’s economy slows unexpectedly as rebound sputters  MarketWatch
  3. China’s Economic Recovery Weakens Amid Fresh Covid Flareups  Bloomberg
  4. China unexpectedly cuts key rates as economic data disappoints
  5. View Full coverage on Google News

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6 Questions About the Market & the Economy – A Wealth of Common Sense



I did a radio interview this week.

I don’t do a lot of these things because it’s just easier and more comfortable to talk about stuff on my podcast but this one sent me a great list of questions ahead of time that I liked.

Here are 6 of the best questions with some thoughts on each:

(1) What is your reaction to the latest CPI report and your outlook on inflation?

Inflation was basically flat from June to July.1

This is the first good news we’ve gotten on the price front in a while. You can see the energy components finally softened in a big way (via the BLS):

Inflation of 8.5% over the past 12 months is still uncomfortably high but it’s going to take a while for that rate to subside, even if prices do continue to slow in the months ahead.

Obviously, one data point does not make a trend but it does seem like the Fed’s moves along with some easing of supply chains have helped stop the uninterrupted rise in prices.

Gas prices are down like 60 days in a row. Oil prices are down. Used car prices are finally falling.

We can build on this (I hope).

(2) Where does the Fed go from here?

It’s difficult to know exactly what the Fed will do without knowing what the inflation data will look like in the coming months.

Back in the summer of 2020, the Fed said they were comfortable letting inflation run hot for a while if it meant a more robust recovery for the labor market.

The labor market is certainly in a better place than it was in 2020 but inflation is running just a smidge higher than their 2% target.

Fed officials say they’re not done hiking rates just yet and I tend to believe them (for now):

Minneapolis Federal Reserve Bank President Neel Kashkari on Wednesday said he is sticking to his view that the U.S. central bank will need to raise its policy rate another 1.5 percentage points this year and more in 2023, even if that causes a recession.

The Fed is “far, far away from declaring victory” on inflation, Kashkari said at the Aspen Ideas Conference, despite the “welcome” news in the consumer price index report earlier in the day that inflation may have begun to cool.

Kashkari said he hasn’t “seen anything that changes” the need to raise the Fed’s policy rate to 3.9% by year-end and to 4.4% by the end of 2023. The rate is currently in the 2.25%-2.5% range.

The Fed waited too long to act and they don’t want to look like idiots again.

They care more about inflation than the job market right now so they’ll likely keep raising rates until we get a number of lower inflation prints.

If they go too far that has to be a risk to both the stock market and the economy.

(3) What does a soft landing look like?

Let’s start with what a hard landing looks like and work backwards.

A couple of months ago I looked at what has happened to the unemployment rate during past recessions:

The average increase is more than a doubling off the lows. That would take us to more than 7% from the current 3.5% unemployment rate.

To me, a soft landing would see inflation below 4% or so without a commensurate rise in the unemployment rate. The lowest it’s ever increased to during past slowdowns is just over 6%.

I’d say anything 5% and under for the unemployment rate would be a win if we could get inflation back to 3% or so.

What’s the scenario that could make this happen?

The labor market is in a weird place right now since there are more jobs available than people who are looking for one:

Those openings have come down a bit from 11.7 million to 10.7 million. The dream soft landing scenario for the Fed would see these openings fall by 4-5 million but the unemployment rate doesn’t go much above 4-5%.

Is this actually possible?

History says no but employers have been dealing with a challenging hiring market since the start of the pandemic.

Sam Ro wrote a thought-provoking piece this week about the concept of labor hoarding that’s worth considering:

So what explains the current reluctance to shed workers?

Maybe recent experience has something to do with it.

Much of the ongoing economic recovery has come with persistent labor shortages. Employers haven’t been able to hire fast enough to keep up with the booming demand for their goods and services.

At least some of the employers seeing business slow right now remember how hard it was to recruit talent over the past two years and would rather just hang on to employees, even if it comes with carrying costs.

As a matter of convenience, of course it’s easier to just hang on to workers during a slowdown or recession if you expect the downturn to be brief and shallow.

Millions of people were either let go or put on the shelf in 2020 and that made it more difficult to re-staff once demand came back faster than companies are used to.

What if employers hold onto more employees than in past recessions if they assume the next one will be mild?

What if companies don’t want to go through the hiring process all over again following a recession?

That’s probably the best-case scenario for a soft landing if the Fed does cause a meaningful downturn in economic activity to get inflation under control.

(4) What is your general outlook on the markets and/or a recession?

I wish I had a good answer for this one. I don’t.

We could go into a recession while the stock market hits all-time highs.

Or we could see the stock market tank even if the economy improves from here.

Sometimes these things don’t make sense.

My macro outlook has never really helped my portfolio all that much.

Sometimes my thoughts on the economy/markets would have served me well. Other times my thoughts on the economy/markets would have destroyed my portfolio.

Here’s a little secret about investing the pros will never admit — you don’t have to predict the future to be successful in the markets.

Outlooks are more helpful for your ego than your performance in most cases as long as you have a reasonable investment plan in place.

(5) What can we learn from this downturn?

Since the start of 2020, the U.S. stock market has fallen 34%, risen 120%, declined 24% and now gained almost 17%.

In less than 3 years, it’s felt like we’ve lived through every cycle imaginable — 1918, 1929, 1999, the 1970s, maybe the 1960s and some other parallel I’m probably missing.

Everything in the markets is cyclical.

Stuff that has never happened before happens all the time.

The biggest risks are always the things you’re not thinking about or preparing for.

(6) Have we hit a bottom in the markets?

I took a stab at this one a couple of weeks ago and markets are up even more since then.

If inflation keeps improving and there isn’t some outside shock to the system it wouldn’t surprise me to see new highs by 2023 (maybe earlier?).

But the risk of a Fed policy error has probably never been higher so I wouldn’t be surprised to see more volatility in the months ahead either.

If that was the bottom, it will feel obvious once we know for sure.

If stocks roll over again, that will seem obvious too.

That’s the kind of market we’re in.

If stocks fall further that could present a good opportunity to rebalance into the pain.

If stocks keep rising you’ll just have to wait for the next correction to buy at lower prices.

Bottom or not, volatility is a feature of the stock market and it will return at some point.

Further Reading:
Every Time Out it’s a Guess

1Technically it was 0.02% lower but I’m not a fan of decimal points with economic data.


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