Greg Valliere began his portion of the Schwab Impact 2013 preconference session on Sunday by telling a joke illustrating how low Congress has fallen in the public's esteem. The owner of the capital city's NFL franchise had decided to change the name of the team, he reported. "He's keeping 'Redskins' but he's dropping 'Washington,'" the political researcher and consultant deadpanned to appreciative laughter, before going on to explain three main causes of optimism emanating from Washington.
Impact is being held in Washington this year, and as of the preconference session, had attracted 1,927 advisor registrants and 1,178 sponsors and exhibitors, according to Schwab. The Sunday afternoon session featured Valliere speaking about politics and Liz Ann Sonders, Schwab's chief market strategist, speaking about the economy and the markets, before the two decamped to a new feature at Impact: a more intimate Q&A session on smaller stages in the "Exchange" on the exhibit floor.
Valliere, chief political strategist for the Potomac Research Group in Washington and a popular speaker at Impact conferences, said he's "quite bullish" on Washington, and believes there will be no repeat of the debt ceiling debate nor another government shutdown, citing even Republican sources for that prediction.
Moreover, he is optimistic about developments inside the Beltway for three main reasons. One, because this is "the most dovish Fed in my lifetime," mentioning a number of local Fed governors's dovish views as well as that of the putative Federal Reserve Chairman, Janet Yellen, who he predicted will be confirmed at her Nov. 14 nomination hearing, though possibly "with a hiccup." Due to the mixed result of QE3, Valliere expects that the Fed would likely not start tapering its Treasury purchase until early in 2014, and won't get around to raising the federal funds rate until 2015. Tapering can't begin earlier, he said, because the "biggest problem the Fed has is that inflation is too low." That's because the Fed's favorite economic indicator, unit labor coasts, were up only 1.1% in the latest GDP numbers. As a result, tapering may begin in the new year, with monthly Fed purchases declinging from the current $85 billion to "maybe $75 billion."
The second cause for optimism, said Valliere, was the "strong atmosphere of fiscal restraint" in Washington. The budget deficit continues to decline, he said, due to a sharp increase in receipts, "no new spending, none" because with the current House of Representatives in control, there "will be no new spending in this town," and because of actual spending cuts. "Usually, 'spending cuts' means a decrease in the rate of spending increases," he said, "but we're seeing real cuts now, for the first time in my career."
As an aside, Valliere mentioned that Obamacare will prove to be an "albatross" for Democrats, especially with its problem-filled rollout, overtaking the Republicans' own albatross, the government shutdown. As a result, he thinks the GOP may add "three to four" seats in the Senate." His final cause for optimism is something that he says has "stunned this city: an activist, liberal president who is totally dead in the water," which means that deadlock will continue to persist in Washington.
