The Healthcare Elephant – Republican lawmakers still appear to be short the 51 votes they need to pass the Better Care Reconciliation Act, even after further changes meant to placate moderates and the more conservative arm of the Senate. There have been murmurs of simply repealing the existing law and having the repeal go into effect down the road, maybe two to three years, which would buy lawmakers more time to work on the replacement. At this stage, no matter what, Senate Majority Leader Mitch McConnell has set a vote on the GOP healthcare bill for next week and delayed the Senate’s August recess in anticipation of having an approved bill on the president’s desk. There are many reasons this bill is important – but from an investor’s and the market’s standpoint, perhaps the biggest reason is that healthcare stands in the way of other economic reforms, like tax cuts, deregulation, and infrastructure spending. The market has baked-in expectations that some form of legislative change will come and have an impact on the business world, but it remains to be seen when these issues will be addressed.
A Move Toward Deregulation – as mentioned above, hidden behind the healthcare law are the ongoing policy objectives of deregulation, tax reform, infrastructure spending, and so forth. On the deregulation front, there was a quiet chess move taken when President Trump nominated Randal Quarles, an investment fund manager and former Treasury official, to be the central bank’s chief in charge of regulating big banks. Quarles has a notable stance of favoring less regulation and executive overreach, and his nomination is a signal of the administration’s goal to move in that direction. Besides serving as vice chair of supervision, Quarles would weigh in on monetary policy as one of seven members of the Fed’s board of governors. Meanwhile, closer to the White House, the U.S. Treasury is taking aim at the Obama-era “earnings stripping” rule intended to prevent companies from reducing tax bills by shifting profits overseas. Under the Obama administration rules, companies are supposed to be compliant by January 2018, it has been met with fierce resistance from many in Corporate America. A full repeal or streamlining of the rules is being considered.
Can Amazon Get Any Bigger? – you bet it can. “Prime Day,” which took place this past week, posted record sales for the company and also managed to exceed the combined sales of Cyber Monday and Black Friday in 2016. It was also reported that “tens of millions” of Prime members purchased something on “Prime Day,” which was up 50% from last year. The company also added more Prime members in a single day than ever before.
Yellen Turning Dovish? – In comments made to Congress this week, Janet Yellen sounded a surprisingly dovish tone, which was somewhat inconsistent with the Fed’s messaging over the last few months. Yellen stated that “because the neutral rate is currently quite low by historical standards, the federal funds rate would not have to rise all that much further to get to a neutral policy stance.” She added that, “because we also anticipate that the factors that are currently holding down the neutral rate will diminish somewhat over time, additional gradual rate hikes are likely to be appropriate over the next few years to sustain the economic expansion and return inflation to our two percent goal.” The notion of normalizing interest rate policy, at least in the traditional sense, seems to be delayed once again. The markets moved higher on the news.
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