Finance
This week in Bidenomics: Kamalanomics looks better
After the Federal Reserve cut interest rates by half a point on Sept. 18, President Biden called the move a “declaration of progress.” Inflation isn’t yet whipped, but victory is coming into view.
There’s some other progress that’s important for Democrats. Voters and investors are warming to Vice President Kamala Harris’s economic plan as the Democratic presidential nominee and her Republican opponent, Donald Trump, enter the home stretch of the campaign. Even better for Harris, voters seem to blame her less than Biden for the high inflation of the last three years, which sent Biden’s approval rating into an unrecoverable nose dive.
The Financial Times has now conducted two monthly polls in a row in which voters say they trust Harris more than Trump to handle the economy. When Biden was still in the race, Trump beat him handily on the economy. But Harris inched ahead of Trump in August and expanded that lead slightly in September.
That FT poll looked like an outlier back in August, but other data now shows Harris drawing even with Trump on the economy. The latest Morning Consult poll finds 46% of voters trust both Harris and Trump on the economy. On issues such as the cost of living, housing affordability, and jobs, Harris’s approval rating exceeds Biden’s by 25 percentage points or more. That’s a startling shift, given that Harris’s policies are quite similar to Biden’s and she is, after all, the incumbent.
Read more: What the 2024 campaign means for your wallet: The Yahoo Finance guide to the presidential election
In a recent Quinnipiac poll of swing states, voters in the crucial state of Pennsylvania rate Harris higher than Trump on the economy by two points. She’s two points behind on the economy in Michigan and four points behind in Wisconsin, yet once again, she’s closing a large gap. In University of Michigan surveys, 41% say Harris would be better for the economy, while 38% say Trump would be better, and 15% think it won’t make any difference.
Finally, in monthly surveys of business executives by Oxford Economics, a Trump presidency ranks as the top geopolitical concern during the next year. Worries about the adverse effects of a Trump presidency have climbed for three months in a row, with 43% of respondents now saying another Trump presidential term would pose a significant risk to the global economy. That’s largely because of Trump’s promise to enact sweeping tariffs and deport millions of working migrants. A Harris presidency doesn’t register as a geopolitical risk, as it would, in many ways, represent a continuation of the status quo.
These improving views of a Harris economy and dimming views of a Trump economy aren’t happening in a vacuum. Forecasting firms such as Goldman Sachs crunched the numbers and concluded that Harris’s policies would be better for economic growth than Trump’s. Those types of analyses typically assume each candidate can get Congress to fully enact favored policies by passing legislation, which isn’t always realistic. Yet Trump’s most concerning economic policies — tariffs and deportation — are things he could do largely without congressional approval. Harris’s most disruptive policies — a higher corporate tax rate and a new wealth tax, for instance — would only be possible under a Democratic sweep of Congress and the White House, which seems unlikely.
Read more: Trump vs. Harris: 4 ways the next president could impact your bank accounts
Harris, meanwhile, has focused heavily on pocketbook issues such as more affordable housing, healthcare, and childcare. The Morning Consult survey found such policies to be highly popular, and it also found that voters broadly associate those policies with Harris. Trump has few specific ideas for lowering everyday costs.
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None of this means Harris is cruising to victory. The race remains incredibly close, with the final electoral vote tally likely to come down to small pockets of swing voters in six or seven states. In the Michigan surveys, independent voters seem to favor Trump on the economy, which could spell trouble for Harris among the late-breaking swing voters she’ll need to win.
What Harris seems to be doing, however, is neutralizing what was once Trump’s biggest advantage. As ever, the economy is the top issue for voters, and when Biden was the Democratic candidate, Trump’s edge on the economy was beginning to look indomitable. Before Biden withdrew in July, betting markets gave Trump 66% odds of winning and Biden just 18%, with Harris and other potential Biden replacements making up most of the rest.
The same betting markets now give Harris 52% odds of winning, and Trump 47% odds. That says more about momentum than the actual likelihood of winning, but at the moment, you’d rather have Harris’s mojo than Trump’s. It’s too early for Harris to declare victory, but a declaration of progress would be fitting.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on X at @rickjnewman.
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FRANKFURT, March 26 (Reuters) – Euro zone banks have limited direct exposure to the war in the Middle East, but the conflict could still generate systemic stress given interconnected vulnerabilities, European Central Bank Vice President Luis de Guindos said on Thursday.
Financial markets have come under stress in recent weeks from the impact of the U.S. and Israeli war on Iran, but the selloff outside the Middle East has been limited, even as some assets remain overvalued.
“Spillovers to the euro area financial sector have so far remained contained,” de Guindos said in a speech. “Direct bank exposures to the region are limited, and the banking system is well positioned with strong profitability and robust capital and liquidity buffers.”
De Guindos argued that even market infrastructure operators, like central counterparties whose services include energy markets, have managed margin requirements effectively, despite the volatility.
Still, there was a broader risk, given interconnections in the financial system, said de Guindos, whose roles at the ECB include monitoring financial stability.
“Amid already elevated global uncertainty, this conflict could trigger the unravelling of interconnected vulnerabilities and cause systemic stress,” he said.
The conflict threatens to derail market sentiment at a time when asset valuations are high, potentially leading to a sharp repricing of risk for leveraged borrowers and sovereigns while amplifying stress in the non-bank financial sector, he said.
On the ECB’s core mandate of ensuring low inflation, de Guindos repeated the bank’s warning that inflation could rise and growth slow on the conflict but argued more time was needed to understand the full impact.
“We are unwavering in our commitment to ensuring that inflation stabilises at our 2% target in the medium term,” he said.
(Reporting by Balazs Koranyi; Editing by Toby Chopra)
TORONTO — Ontario should be prepared for “tougher times” amid global economic disruption, but the government won’t slash public sector jobs to buttress the budget amid uncertainty, the finance minister is signalling ahead of Thursday’s fiscal update.
Other provinces have recently braced against the economic headwinds by forecasting record deficits, raising taxes and cutting front-line jobs, but that will not be Ontario’s approach, Peter Bethlenfalvy says.
“The world has changed — and Ontario must be ready for what change may bring, even if that means being prepared for tougher times,” he said in a pre-budget speech earlier this month.
“As a government, we cannot eliminate uncertainty, but we can mitigate risks with a responsible, balanced fiscal approach that supports public services and infrastructure while maintaining flexibility.”
In that speech, he twice mentioned delivering government programs “efficiently and sustainably,” words that are sometimes used by politicians to signal belt tightening.
“I think it reflects the fact that we’ve got to make sure that the money, the significant investments we’re making in social services, health care, education, gets to the workers who are providing, whether it’s a social worker or a health-care worker or a teacher, and making sure all the money just doesn’t flow to administration,” he said Wednesday in an interview.
Ontario has already tasked hospitals with coming up with a three-year plan to balance their budgets, in a bid to get a handle on growing deficits in the sector, using an assumption of getting two per cent annual funding increases. That is half of the increase they received the previous year.
Some hospitals have already started making some “lower risk” cuts under that plan, the Ontario Hospital Association has said. The province would need to add about $2.7 billion to meet the full operating needs of the hospital sector, the association has said.
The province’s deficit, in the most recent fiscal update earlier this year, stood at $13.4 billion. Bethlenfalvy has been silent on whether the path to balance remains the same as his plan in last year’s budget to get into the black in 2027-28.
Balance, however, has been a moving target. The 2027-28 goal is a year later than Bethlenfalvy projected in the 2024 budget, which itself was a year later than he projected in the 2023 budget.
Ontario’s books are in a relatively good position to be able to stay on the province’s path to balance and lower the net-debt-to-GDP ratio, as long as it doesn’t use fiscal breathing room to announce new spending commitments, according to a budget preview from Desjardins.
UK inflation held at 3% in the year to February, before the start of the conflict in the Middle East, which has sent energy costs soaring and led to concerns of a resurgence in pricing pressures.
The latest consumer price index (CPI) reading from the Office for National Statistics (ONS), released on Wednesday, was in line with consensus expectations. This came after inflation fell to 3% in January from 3.4% in December.
The ONS said that clothing made the largest upward contribution to the monthly change in inflation in February, while motor fuels was the biggest downward contributor.
Read more: Multiple Bank of England interest rate rises expected after energy price surge
The data covered the period before the start of the conflict between the US, Israel and Iran on 28 February. The conflict has disrupted oil (BZ=F, CL=F) and gas (NG=F) supply, sending prices soaring, with concerns that a prolonged energy price shock could push inflation back up.
Grant Fitzner, chief economist at the ONS, said: “The largest upwards driver was the price of clothing, which rose this month but fell a year ago.”
“This was offset by falls in petrol costs, with prices collected before the start of the conflict in the Middle East and subsequent rise in crude oil prices.”
The Bank of England (BoE) warned last week that inflation will be higher in the “near term” due to the shock from higher energy prices, as it announced it had kept interest rates on hold at 3.75%.
Commenting on February’s inflation figures, chancellor Rachel Reeves said: “In an uncertain world we have the right economic plan, taking a responsive and responsible approach to supporting working people in the national interest.”
“We’re taking £150 off energy bills and providing targeted support for those facing higher heating oil costs. We’re also acting to protect people from unfair price rises if they occur, bring down food prices at the till, and cut red tape to boost long-term energy security — building a stronger, more secure economy.”
Ruth Gregory, deputy chief UK economist at Capital Economics, said: “The economy entered the energy price shock caused by the conflict in the Middle East with CPI inflation stuck at 3.0%.”
“And based on our current working assumptions about oil and gas prices, we now think CPI inflation could rise to a peak of about 4.6% in Q4.”
“With the energy price shock likely to extinguish growth and add to the already elevated unemployment rate, in our baseline scenario we still think an extended interest rate pause is more likely than interest rate hikes,” she said.
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