Editor’s Note: Morning Money is a free version of POLITICO Pro Financial Services’ morning newsletter, which is delivered to our subscribers each morning at 6 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro.
Trump’s bizarre hospital stay — The political and financial worlds will remain transfixed this week on Walter Reed Medical Center, where President Trump remains battling Covid-19. Trump took a deeply strange motorcade trip Sunday afternoon, potentially exposing all those riding with him to the virus.
Trump’s doctors FINALLY admitted Sunday that the president had suffered serious drops in his oxygen level and required supplemental oxygen. But they ALSO said he could leave as soon as Monday. The whole communication mess is already opening the White House to significant complaints.
The timeline on Trump’s diagnosis, his actions after knowing he’d been exposed and the precise nature of his condition remain shrouded in double-speak and deflection. So it’s hard to know if the president will actually be well enough to return to the White House on Monday. We certainly hope so. Markets have so far taken the diagnosis pretty well, which tells us something about how they’d react to a Joe Biden victory (not badly).
But a significant turn for the worse for Trump raising questions about transfer of power and the fate of the Nov. 3 election could still spark serious volatility. AP has a nice explainer of what could happen in various scenarios. The Electoral College would take on new significance should the worst outcome materialize (and God willing it won’t.)
Compass Point’s Isaac Boltansky sums up the confusion: “After a weekend of White House communication missteps that can only be charitably categorized as bumbling … it is difficult to have much faith in anything relating to this story.”
Economy update — Via new NABE Outlook Survey report out this a.m. reflecting the views of 52 professional forecasters: “The median forecast calls for a 25% annualized growth rate in the third quarter of 2020 … That would reverse much of the 31% annualized decline from the second quarter.
“However, the panel has become less bullish about the fourth quarter of 2020, as well as 2021. The median real GDP growth estimate for 2021 is 3.6%, compared to a 4.8% forecast in the June survey.”
DRIVING THE WEEK — Trump’s condition will obviously dominate the headlines … The House is gone through the election but could be called back if a big stimulus deal finally materializes (which it probably won’t but could) …
The Senate is also sort of gone but will continue hearings including SCOTUS hearings the week of Oct. 12 … VP debate on Wednesday in Salt Lake City … Fed Chair Jay Powell speaks about the economy on Tuesday at 10:40 a.m. at the NABE annual meeting
ASIA/FUTURES RISE — News on Trump’s condition helped lift markets early Sunday night. But who knows what we will learn today. Via Reuters: “U.S. stock futures rose on Monday on hopes that President Donald Trump could be discharged from hospital later in the day, easing some of the political uncertainty that shook Wall Street in the previous session. …
“Doctors treating Trump say they are pleased with his progress. Relief about his health could fuel a rally in equities and other risky assets as investors prepare for the run-up to next month’s U.S. presidential election.”
VP DEBATE BUBBLE — Usually it doesn’t mean that much and it may not this time either. But with both presidential candidates over 70 and one in the hospital with a dangerous virus, voters might pay a little more attention. And remember that in 2016, Mike Pence kind of crushed Tim Kaine, shocking many Dems who assumed Kaine would perform far better.
THE BIG ECONOMIC RISK FROM TRUMP’S DIAGNOSIS — MM wrote about the muted Wall Street reaction in POLITICO Nightly on Friday. A bigger risk is that the diagnosis, and all the other infections in Trump World, spook consumers and lead to lower spending and demand.
Mohamed A. El-Erian writes on Bloomberg Opinion that the events could wind up “casting an even larger cloud over prospects for consumption and demand, the viability of certain service sector activities and the overall economic recovery.
“This comes when there is little likelihood of Congress passing a new fiscal package that both provides relief to suffering Americans and helps with the challenging task of “living with Covid” as scientists scramble to invent therapies and vaccines.”
BIDEN STILL AT RISK — Our Natasha Korecki and David Lim: “For more than six months, Joe Biden’s team went to extraordinary lengths to keep their candidate safe, fastidiously following medical guidelines that enabled him to campaign while guarding him from a potentially deadly virus.
“Now, the Democratic nominee is facing the prospect that the president of the United States himself might have posed the biggest Covid-19 risk to his health since the pandemic began.It could be days before the 77-year-old Biden will be in the clear, despite recent negative tests. The virus can incubate for up to 14 days.”
But for now, Biden remains negative.
TRUMP DIAGNOSIS FUELS UNCERTAINTY FOR SKITTISH STOCKS — Reuters’ April Joyner and Lewis Krauskopf: “Investors are gauging how a potential deterioration in President Donald Trump’s health could impact asset prices in coming weeks, as the U.S. leader remains hospitalized after being diagnosed with Covid-19.
“So far, markets have been comparatively sanguine: hopes of a breakthrough in talks among U.S. lawmakers on another stimulus package took the edge off a stock market selloff on Friday, with the S&P 500 losing less than 1 percent and so-called safe-haven assets seeing limited demand. News of Trump’s hospitalization at a military medical center outside Washington, where he remained on Saturday, came after trading ended on Friday.”
INVESTORS CAN TAKE REFUGE FROM ELECTION-RELATED VOLATILITY — WSJ’s Paul Vigna: “A contested election. No clear victor. A disruption to mail-in voting. The potential doomsday outcomes of an already-caustic presidential election campaign are spurring anxiety among investors who are trying to position themselves for any wild surprises.
“Some are using sophisticated derivatives tied to the Cboe Volatility Index to bet on dramatic swings in markets through the end of the year. But for those who don’t want to get involved in exotic and risky gambits, there are other strategies investors can take to protect their portfolios.”
EMERGING MARKETS LOOK TO HOLD THE LINE — Bloomberg’s Netty Idayu Ismail, Lilian Karunungan and Sydney Maki: “Put aside the inevitable hit that risk assets are taking as a result of President Donald Trump’s sickness. Emerging markets can celebrate a few plus points. Staring down almost $16 trillion of negative-yielding debt worldwide, investors will continue to be drawn to the higher returns offered by emerging-market assets and the prospect of an economic recovery next year, analysts say.
“Developing-nation currencies are also benefiting from broad dollar weakness, with the U.S. currency still below its 200-day moving average. Trump’s diagnosis has also made it more likely Congress and the White House will reach a deal on pandemic relief before the November election.”
STOCK MARKET’S LEADERS APPEAR MOST VULNERABLE TO BIDEN’S TAX PLAN — WSJ’s Karen Langley: “Major U.S. technology stocks look vulnerable to a corporate-tax increase that might result from a Democratic sweep in November, potentially undermining one of the strongest drivers of the market’s recovery this year.
“Democratic presidential nominee Joe Biden has proposed raising the corporate tax rate to 28 percent from 21 percent, imposing a new minimum tax on U.S. companies and increasing taxes on foreign income of many U.S.-based multinationals, among other plans.”
THE PANDEMIC DEPRESSION IS OVER, BUT THE PANDEMIC RECESSION IS JUST BEGINNING — NYT’s Neil Irwin: “There is a straightforward narrative of the economy in 2020: The world shut down in the spring because of the coronavirus pandemic, causing an economic collapse without modern precedent.
“A sharp recovery began in May as businesses reopened. That is accurate as far as it goes. But the snapback effect over the summer has masked something more worrying: We’ve entered a longer, slower grind that puts the economy at risk for the indefinite future.”
But a Covid-19 vaccine deployment would give the global economy a boost next year — WSJ’s Paul Hannon: “Gaining a vaccine to help contain the novel coronavirus would provide a big boost to the global economy in 2021, but the initial geographic distribution of that benefit will likely depend on which vaccine candidate works first. Public health officials around the world increasingly believe at least one of the vaccines now in the later stages of testing will become usable.
“They say it’s possible one or more will be available for a small number of vulnerable people by the end of this year, spreading out to more of the population over 2021. And economists are increasingly factoring that rollout into their forecasts.”
WELCOME TO THE WORLD — Kevin Ackler, manager at Strategy&, the strategy consulting business of PwC, and Z’hara Ackler, style expertise lead at Chanel, on Wednesday welcomed Andre Lenox Ackler.