Voters Rebuke Trump Economic Agenda

[00:00:00] Speaker 1: Obviously, there's a lot of post-mortem happening of last night's results. It seems a lot of it. If you listen to J.D. Vance, it comes down to the war with Iran and the impact it has had on the U.S. economy. Democrats are now pledging with their newfound majorities to end the war with Iran. If we see an end to that, how quickly could some economic relief follow? [00:00:18] Speaker 2: It's happening today. I'm a little surprised that we had the reaction last night that kind of made sense because love Trump or hate Trump, he's been very friendly to financial markets, particular certain sectors like AI, data centers, crypto, energy, and to some extent financial services. I thought the reaction might have been a little bit more violent. I still think that could happen because the data center AI trade has not generally been friendly to the average American. And given the wipeout that the Republicans had, some of the moratorium talk and regulation could surface in January. And, of course, the momentum right now clearly favors the Republicans, or the Democrats, rather, in 28. But what's happening, I think, today is the move in oil is very important. And Chuck Schumer mentioned that, you know, he's going to basically stop the war in Iran, and he's got Republicans to support him. I've been telling clients that we're basically going to be out by, I think, by the end of the first quarter. And I've been thinking all along this would drag on for a variety of reasons. So I've not been in, like, this is going to happen any day moment. [00:01:25] Speaker 3: Because of last night, you're saying it's going to be by the U.S. [00:01:27] Speaker 2: So I think, Jay, the President Vance, Vice President Vance, sort of, directionally is correct. There are a variety of reasons why the Republicans did so poorly. But certainly, affordability is a huge issue when you've got negative real wage growth, which is the opposite of what happened during Trump's first term. In fact, having been there twice, the Trump policies in the first term are very different than the Trump policies in the second term, more or less. And it was his inability to deliver, which created a tremendous backlash of the American worker, or the working class, of which Trump did very well in the prior three elections. [00:02:03] Speaker 3: Is the market also happy because investors think this is the end of the tariff regime, as we know it? [00:02:09] Speaker 2: Maybe. But I wouldn't push it that far. Because if you look back in the Biden administration, they kept all of Trump's tariffs. They had voluntary export restraints. [00:02:16] Speaker 3: And he could do EOs all day long. [00:02:17] Speaker 2: He could do EOs all day. But, you know, China is still a strategic competitor and peer adversary. And maybe some of the tariffs against our partners and friends, Mexico and Canada, come off. We go back to a more solid MCA, USMCA type of framework. But I don't think that if this is a tariff trade, I would fade it. I don't think the tariffs of China, which is their main competitor, are going to change very much. And a Democrat may actually put them in place. The issue I have with the tariffs is the way they were executed. But in theory, you know, tariffs are neither good nor bad. If they're designed to protect industry and bring supply chains back, then that's great. [00:02:57] Speaker 1: I want to go back to the AI infrastructure buildout and data centers, which were literally on the ballot in many referendums in this cycle. But also were front and center in so many of these races. We now have gubernatorial victors in places like Texas and Georgia, where these buildouts are concentrated, who have campaigned in part on a moratorium on stopping them for the time being. Until there are clearer community protections in place, you have members of Congress who are pledging to reign this in as well and reign in artificial intelligence. Considering the CapEx boom around this that has been powering equity markets and the actual infrastructure, physical construction boom that has helped juice GDP, what happens if Democrats follow through on their campaign promises and act to slow it down. [00:03:39] Speaker 2: Yeah, I don't I don't even think it's actually a Democrat versus Republican story. It's bipartisan. It's bipartisan. I think the thing is, is that under the Trump administration, they've had a very laissez-faire approach to regulation. And anything that rocks the apple cart, so to speak, you would think would be negative. There's just a lot to digest as we get into the new Congress. They're going to be sworn in. I think it's it was January 3rd or 4th. Third. Third. We're going to hear more about what these new politicians and policy people are going to say. And I do think there will be some headwinds to the exuberance, whether it ends the boom remains to be seen. But I do think I do share your maybe if I'm reading this correctly, your sort of skepticism or concern. Hey, look, you know what, this is like things aren't going to be as good. And maybe that's the right approach, by the way, because I actually don't want a data center near me with all due respect to the data center people. [00:04:32] Speaker 1: You said that. I have no opinions, by the way, just questions. [00:04:35] Speaker 3: You were at the Treasury all that long ago. Do we have to worry about a fiscal cliff? Is the debt limit going to be addressed by Republicans in the lame duck or by everyone in the new Congress? [00:04:46] Speaker 2: No. So I don't think there's I mean, there might be a couple of things that are done before the new session. I mean, maybe we extend the continuing resolution, which I believe ends December 11th. Extend that. We're not going to have a budget. Farm bill, defense authorization, kind of like the bare bones necessary things. But, Joe, we're going to fight over the debt ceiling next year. Now, is the debt a problem? Well, in theory, it is. We're on an unsustainable track. But, you know, the market isn't punishing us on that. The rates have backed up this year largely because, you know, we've had an economic boom. And that's sort of the self-inflicted aspect of Republicans, what they did wrong. The economy is performing very well. Labor markets held in. But the U.S. went into Iran, the Trump administration went into Iran. The public didn't support it. It certainly hurt them. Cost of living was a problem to begin with. Rates went up. I mean, it's sort of, you know, there's a lot of self-inflicted, unforced errors. And so we'll see what happens. But the economy is still pretty healthy. Labor markets look good. And the Fed will keep raising rates. It's not a bad thing. [00:05:50] Speaker 1: Just quickly on the Fed, if the president is presented with the opportunity to name any new nominees to the Fed board, he's now going to have to get them through a Democratic Senate. [00:05:58] Speaker 2: They're not going to get. There's not enough time. No. It's not going to happen. Okay. It's not going to happen, no.