The House Votes To Impeach Donald Trump a Second Time… Alleging incitement of insurrection by encouraging violence following the breach of the Capitol Building on January 6, all 222 Democrats and 10 of the 197 Republicans voted to Impeach President Trump.
What it means— It’s only the second week of January, and many already wish that this year was over. The second impeachment is likely to end the same way that the first one did. The Senate, scheduled to reconvene on January 19, will have one day to consider the matter before Biden’s presidential inauguration. Then, the chamber will have to contend with the idea of impeaching a man who no longer holds office, something that has been done to a senator (Blount, 1797) and two secretaries of war (Calhoun, 1827, and Belknap, 1876), but never to a former president. If the Senate votes to impeach, then it can impose a penalty that includes banning Trump from holding public office. With tens of millions of Americans still supporting the president, this doesn’t sound like a unifying strategy, but that doesn’t appear to be the goal.
For those who have the Brandenburg test (Brandenburg v. Ohio) from the Supreme Court floating in their heads as the bar that must be passed to prove incitement, it’s worth remembering that impeachment is a political proceeding. Senators can find a president guilty of a crime even if a court would not.
Biden Unveils a $1.9 Trillion Relief Package… President-elect Biden announced that he will ask Congress to pass an almost $2 trillion spending bill to fight the health and economic consequences of the pandemic.
What it means— Well, Biden’s definitely going to hit the ground running. Even before taking office, he is calling for the quick passage of a spending measure that will send $350 billion to cities and states and almost $1 trillion to individuals through additional $1,400 stimulus checks and increased unemployment benefits and will earmark several hundred billion dollars to be used to roll out the coronavirus vaccines faster.
The vaccination rally is at risk as healthcare workers are reluctant recipients. Last week there was a radio report that first responders were refusing vaccination. This is on top of the antivaccine mantra on social media. Government has a big re-education hurdle. That is complicated by Norway’s warning that vaccinating the elderly may not be advisable.
City and state leaders around the country are likely to be jumping for joy, as are consumers, but it’s hard to see how adding more money will speed up the vaccine rollout, which is hampered by bottlenecks at the state and local levels. Landlords won’t be thrilled, as the bill calls for a moratorium on evictions through the summer. That’s a long time for them to go without collecting rents.
Consumer Prices Jumped 0.4% in December… The gain brought annual inflation up to 1.4%.
What it means— Gasoline prices rose more than 8% last month and accounted for much of the gains in the headline inflation number. Excluding food and energy, prices moved up a much more modest 0.1%, and the core inflation rate remained steady at 1.6% for the third consecutive month. Inflation remains about a full percentage point lower than it was before the pandemic, but that might not last.
The government estimates shelter prices, which account for 30% of consumer prices, by figuring out what you would have to pay to rent your own house (rental equivalence). Rents have been skewed lower by the pandemic. Eventually, this computation will catch up with sales prices which have been marching higher and will drive up inflation.
Over the next six months, we’re likely to get another relief package that rains money on consumers and funnels cash to cities and states, along with an infrastructure proposal. Add to that another $720 billion in Fed bond buying and you’ll get an economy swimming in money just as it reopens.
Inflation could pick up quickly by the summer, and no one knows how long or how far the Fed will let inflation go before dialing back bond buying and raising rates. Nervous investors could push interest rates higher if they see prices heat up. Signs of inflation may be premature as the base rate is in the basement. Indication of a 2% or greater rate may merely be a return to normal. The Fed’s interpretation of data will be critical for the markets.
The Fed can keep short-term rates low. It cannot control longer dated term rates when demanded by investors. Rising longer term rates cause the yield curve to rise which is beneficial for the banking industry. It is a negative for investors with mandated bond exposure.
Retail Sales Dropped 0.7% in December… Retail sales were expected to be flat last month but instead fell, because e-commerce sales dropped by 5.8%.
What it means— Electronics and appliance store sales dropped 4.9% and food and drink services also declined, as the increased lockdowns took a toll. Overall, retail sales were 2.9% higher for the year, which isn’t bad, given everything that happened in 2020. Investors will likely look past these numbers, given the huge spending measure that Biden proposed.
Cadillac Introduces Flying Cars, Because They Can’t Sell the Normal Kind… Was that too harsh? This week at the virtual Consumer Electronic Show (CES), General Motors unveiled its concept flying car, a single-passenger electric vertical takeoff and landing (eVTOL) craft. The vehicle is being developed as the Cadillac Celestiq, but don’t look for it any time soon and don’t think you’ll see it zooming around your neighborhood.
These vehicles fall under flying taxi concepts and face huge hurdles. They must pass FAA muster and can operate only between predetermined ports. That sort of takes the fun out of it and narrows the potential market considerably.
Data supplied by HS Dent Research
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