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5 things to start your day

September 28, 2020
Five Things
Bloomberg

Trump's personal finances, slim hopes for stimulus, and a grim Covid milestone. 

Not a lot 

President Donald Trump paid $750 in U.S. income tax in both 2016 and 2017, according to a report in the New York Times. The documents, which Bloomberg News has not verified, also show Trump is losing millions of dollars on his golf courses and has hundreds of millions of debt that will come due in the next few years. The president said the story "is a total fake" while still refusing to release his returns until an audit is complete. The Biden campaign has pounced on the release with weeks to go before the election. It's also been an opportunity for merchandisers hawking "I paid more in taxes than Donald Trump" wares. 

Still hope 

The rapidly diminishing chances of a new fiscal stimulus package ahead of the election have not been completely extinguished yet. Speaker Nancy Pelosi said Democrats would unveil a new "proffer" shortly, adding that she would prefer the House majority to pass an actual deal than simply vote on a package that would be dead on arrival in the Senate. While there were some talks between Pelosi and Treasury Secretary Steven Mnuchin on Friday, the continuing deep divides on the size of any package and the very short timeline to the election means lawmakers remain skeptical a breakthrough is possible. 

Grim milestone

The global death toll from Covid-19 will likely pass 1 million today, with cases already above 33 million. Experts say the true number that have died may be almost twice the official tally. The milestone will be passed as governments continue to struggle to contain the disease, with authorities in many countries imposing or extending measures. The Times in London is reporting that the city may be forced into another lockdown. New York officials are concerned about localized spikes in infections, even as the city-wide rate remains low. 

Markets rise

Global investors seem to have take the weekend to reassess their pessimism of last week, with indexes across the world posting strong gains. Overnight, the MSCI Asia Pacific Index added 1.1% while Japan's Topix index closed 1.7% higher, with the country's Nikkei 500 topping its 1980's bubble-era high. In Europe, the Stoxx 600 Index had gained 1.8% by 5:50 a.m. Eastern Time with banks surging as every industry sector was in the green. S&P 500 futures pointed to a jump at the open, the 10-year Treasury yield was at 0.669% and gold was near $1850 an ounce. 

Coming up...

European Central Bank president Christine Lagarde gives testimony to the European Parliament at 9:45 a.m. where she is expected to call for more fiscal stimulus. Dallas Fed manufacturing for September is at 10:30 a.m. Cleveland Fed President Loretta Mester speaks later. Alibaba Group Holding Ltd. holds an investor day and the FT Commodities Global Summit begins. 

What we've been reading

This is what's caught our eye over the weekend.

And finally, here's what Joe's interested in this morning

A big victory for Joe Biden and the Democrats may be the best thing that could happen for oil stocks and bank stocks.

But let me back up for a second. On the latest episode of Odd Lots Tracy Alloway and I talked to Jared Woodard, who is the head of the Research Investment Committee at Bank of America. The topic centered around the question of why do so many disparate assets these days seem to trade in lockstep. Tesla, Ethereum, cloud computing stocks you name it. The charts look the same.
 

This phenomenon, Woodard explains, is a function of the meager growth conditions we've seen in the economy for years. Basically, when profits are hard to come by people will pay a premium for what could be the next big thing, or lottery tickets, or companies that for idiosyncratic reasons are growing a lot despite a stagnant economy overall. If Tesla is the future of cars, it will do well whether GDP is growing at 2% or 4%. If Snowflake (a software company that just IPO'd) has a realistic shot of competing with Amazon, then you can see why investors are paying over 100x revenue for it.

The flipside of all this is that companies with predictable businesses tied to the actual growth of the economy are doing pretty lousy. Here's a look at financial stocks and energy stocks, which are having a horrendous 2020.
 

So what could reverse this situation? GROWTH. And one thing that could deliver a meaningful jolt of growth, according to Woodard, is sustained fiscal firepower and aggressive public investment. In such an environment, the predictable here and now starts to look better, and suddenly there's less of an incentive to take a punt on some speculative future scenario where we're all driving Teslas on Mars and paying taxes in Ethereum. On the episode, Woodard didn't take the bait about whether this meant that unified Democratic DC would be the best thing that could happen to financial and oil stocks. However according to Moody's, a Dem sweep would be the best scenario for rapid growth from 2021, due to the increased prospect for fiscal stimulus.

Of course, nothing is certain about how the policy path would go under any configuration of power in DC. However it stands to reason that the dynamic above could be reversed in a situation where the policy logjam was broken and the government was committed to spending money. Anyway, it was a great conversation, which you can check out here.

Joe Weisenthal is an editor at Bloomberg.

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