Greg Valliere, a longtime Washington insider
Should President-elect Joe Biden pick Massachusetts Senator Elizabeth Warren for Treasury Secretary, the securities markets will see it as "very provocative," argues Greg Valliere, AGF Investments' U.S. policy strategist.
In an interview with ThinkAdvisor, he discusses a more likely choice and forecasts a "thorn in the side of the industry" who could very well oversee financial services regulation in the new administration.
Valliere's smart, popular blog, "Capitol Insights," is a must-read for anyone who wants to get a leg up on what's happening and will happen at the intersection of Washington and Wall Street.
The well-connected Valliere told ThinkAdvisor that a stimulus could be coming sooner than most anticipate: "Over the weekend I talked with some very plugged-in people who think there's a decent chance that Biden and McConnell could reach an agreement on a modest stimulus bill in December."
In our conversation, he explores three big developments that, he says, augur a positive second half for 2021. However, the coronavirus pandemic will bring a "very soft" winter.
Meanwhile, he contends that, if President Donald Trump fails to start the presidential transition process by Dec. 14, the date the Electoral College meets, "the Biden camp will sue the White House" to get the intelligence and funding it requires.
Further, he opines on why Vice President-elect Kamala Harris is a major reason that, he believes, Biden will not be excessively tough on the technology sector.
Valliere has analyzed policy and politics for investors for more than three decades. Formerly chief global strategist at Horizon Investments, at AGF he provides insights into how U.S. policies are shaping world markets.
ThinkAdvisor conducted a phone interview with Valliere on Nov. 19 and an email exchange on Nov. 23. Based in Washington, D.C., the analyst has a background in journalism; his first job was at the Washington Post, where he was a copy boy.
Now 71, he has no plans to retire anytime soon. "It's still fun," he says. "I can't wait to get up in the morning to see what happened overnight."
Here are highlights of our conversation:
THINKADVISOR: What's your forecast for five key areas of the economy and markets. First, financial services.
GREG VALLIERE: Indications are that there'll be a strong influence for Elizabeth Warren [Dem. Sen.-MA] from the left but I think her chances of becoming Treasury Secretary are pretty slim.
The Democrats don't want to give up a [Senate] seat in Massachusetts: If she went to the Treasury, the [Mass.] Republican governor, in all likelihood, would replace her with a Republican. Also, if Biden appointed her Treasury Secretary, the markets would view it as very provocative.
Who do you think Biden might choose for the post, then?
The more likely pick is Lael Brainard, a Federal Reserve Governor with a very, very good reputation.
Do you foresee tougher regulations for the financial services industry?
Yes. And I'd look at Gary Gensler [former chair of Commodity Futures Trading Commission who on Nov. 17 was named to lead Biden's financial policy transition team].
He's become pretty much of a thorn in the side of the industry [e.g., he put into effect new regulations for swaps].
One area in the financial world that the Democrats have big issues with is the private equity industry, which goes in and gobbles up companies and lays people off. I can see tougher regulations, certainly, against that sector.
What do you expect to happen in the technology area?
[Vice President-elect] Kamala Harris has excellent contacts in Silicon Valley — friends who've helped finance her campaigns. She knows all the key players. Therefore, I don't see a pressure climate for the tech companies.
There could be a corporate minimum tax that could hurt them, but the antitrust case that was brought [in October] is probably going to last about seven or eight years.
I just don't see the Biden administration aggressively going after tech, and I think Kamala Harris would be a major reason why.
What about the energy sector?
The oil, coal and natural gas industry won't get a dime from Washington. Any aid would go to alternative energy.
And the defense sector?
It has to worry because after four years of big, big increases under Trump, Biden's defense spending will level off. I'm not sure he'd cut defense spending — but I don't see an increase [coming].
What do you foresee in healthcare?
There'll be a lot more spending on hospitals, but it won't be a good climate for the health insurance companies.
Both the left and the right want to curb drug prices. So there are pluses and minuses for the health industry.
The laboratory companies would do very well because under Biden, the NIH [National Institutes of Health] would get a big increase in funding.
