Editor’s Note: This edition of Morning Money is published weekdays at 8 a.m. POLITICO Pro Financial Services subscribers hold exclusive early access to the newsletter each morning at 5:15 a.m. Learn more about POLITICO Pro’s comprehensive policy intelligence coverage, policy tools and services at politicopro.com.
Wall Street weighs a President Warren — While top executives on Wall Street may be freaking out about Elizabeth Warren’s rise, analysts in the industry are starting to soberly assess what her impact in the White House might be on specific sectors. The biggest impacts would likely be in finance, health care and energy, though all would be limited with a GOP Senate.
Story Continued Below
Via JPMorgan’s Michael Cembalest: “Senator Warren occupies a place on an empirically derived political spectrum that is considerably to the left of 20th century Democratic Presidents …
“[T]he greatest valuation risks would be in store for the following, in alphabetical order: banks (large and mid-sized), biotech, chemicals, energy … healthcare managed payers/service providers…”
CapAlpha’s Ian Katz: “The finance industry recognizes that Warren … knows how to connect with the public and make weedy proposals resonate … If she were to ramble on about carried interest, voters would yawn. But by invoking job losses at Sears, Shopko and Toys ‘R Us, she draws crowds.”
Powell pushes back — Fed Chairman Jerome Powell has not made a habit of directly engaging the many attacks from President Trump. So it was pretty notable that he made an exception, though somewhat obliquely as our Victoria Guida notes, on Monday.
Powell never mentioned Trump in the remarks, in keeping with tradition. But the message was clear: He will not make any decisions on rates that are not in the best interest of the economy just because of angry tweets or whisper campaigns about his job security.
NFIB survey at 6:00 a.m. expected to dip to 102.5 from 103.1 … Producer prices at 8:30 a.m. expected to rise 0.1 percent headline and 0.2 percent core … President Trump awards the Presidential Medal of Freedom to former AG Ed Meese at 4:30 p.m.
KUDLOW SAYS NO LINK BETWEEN BIDEN AND CHINA TALKS — During a gaggle at the White House, NEC Director Larry Kudlow said Trump’s call on China to investigate Joe Biden and his family would play no role in trade talks set to start up again Thursday in Washington: “The president’s view is there is no linkage between that and the trade talks … I guarantee there will be no linkage.”
Asked if Trump was “joking” about the China investigation — which he wasn’t — Kudlow said: “I don’t honestly know.”
MM SIDEBAR — The Chinese can easily isolate the Biden stuff from trade talks. But their incentive to make a sweeping deal with Trump is now extremely limited. They know Trump is in a weakened position facing impeachment along with a slowing economy, especially in the manufacturing sector.
They’ve signaled they are unwilling to even discuss major structural changes to the way they manage their economy. They seem much more likely to either force a limited face-saving deal from Trump or wait him out.
FIRST LOOK — Speaking of the trade war, Weijian Shan, Chair and CEO of PAG in a new piece for Foreign Affairs: “There have been over a dozen rounds of high-level negotiations without any real prospect of a settlement …
“Trump thinks that tariffs will convince China to cave in … China may be willing to budge on some issues, such as buying more U.S. goods … but not to the extent demanded by the Trump administration … The numbers suggest that Washington is not winning this trade war.”
TALLYING THE IMPACT — IHS Markit’s Ben Herzon and Joel Prakken: “We estimate that the increase of trade policy uncertainty from 2014 through 2018 lowered real investment spending and GDP by about $100 billion, or 0.5% of real GDP. So far this year, trade policy uncertainty has been about as elevated as it was last year”
STUDY SUGGESTS PRIVATE EQUITY CAUSES JOB LOSSSES — Our Zachary Warmbrodt: “An academic study of private equity buyouts found significant evidence of job losses at once publicly traded companies after takeovers, though not at privately held firms, a discovery that could complicate efforts to rein in the industry.”
G-20 PREP — Our Bjarke Smith-Meyer: “Trade protectionism, digital tax and Facebook’s plans for a virtual currency are all set for debate at the meeting of finance ministers and central bankers from G20 countries in Washington later this month.
“EU ministers are primed to push on those points in the meeting — and potentially set off a clash with the U.S. — according to a Council document, obtained by POLITICO. The document sets out the bloc’s shared ‘terms of reference’ for European messages to the gathering. The three-page item bemoans how trade tensions between the U.S., China and the EU are putting global growth at risk. Washington, for example, is considering tariffs of up to $7.5 billion on EU exports a year.
BIDEN TRIES TO RALLY THE TROOPS — CNBC’s Brian Schwartz: “Joe Biden’s campaign — which is grappling with weakening poll numbers, a disappointing third-quarter fundraising haul and attacks from … Trump over Ukraine ties — rallied its leading donors and fundraisers over the weekend in Philadelphia as it looks to reestablish momentum in the race for the Democratic presidential nomination.
“That means increased emphasis on Super Tuesday primaries March 3, when 40% of delegates are up for grabs, and not necessarily on the earliest nominating states, Iowa and New Hampshire, where campaigns usually seek to grab an early toehold in presidential races.”
MAJOR STOCK INDEXES VEER LOWER – AP’s Alex Veiga: “A day of choppy trading on Wall Street ended Monday with stocks broadly lower as the market extended its losing streak into a fourth week.
“Technology stocks, consumer goods makers, health care companies and banks accounted for much of the selling, which accelerated in the last hour of trading, erasing modest gains from midday.”
INVESTORS SHOULD FEAR MORE COMPETITION AMONG RATINGS COMPANIES — WSJ’s Jon Sindreu: “Inflated ratings on complex debt structures were one of the culprits of the 2008 financial crisis. While standards have since tightened a lot, new ratings companies threaten to loosen them again.”
HEDGE FUNDS POST BEST PERFORMANCE IN YEARS — Bloomberg’s Vincent Bielski: “Hedge funds are kicking into a higher gear. They gained 4.9 percent on average in the first three quarters of 2019, the best performance in this span since 2013, according to a report Monday from Hedge Fund Research. Equity strategies are leading the gains, followed by event-driven on an asset-weighted basis.”
KUDLOW: DELISTING CHINESE FIRMS ‘NOT ON THE TABLE’ — Reuters’ Pete Schroeder: “Trump’s chief economic adviser on Monday said the administration had begun studying U.S. investor protections in China, but that delisting Chinese companies traded on U.S. exchanges ‘is not on the table.’ ‘The delisting is not on the table. I don’t know where that came from,’ Larry Kudlow told reporters.
“‘What we’re looking at, actually, is investor protection, U.S. investor protections … transparency and compliance with a number of laws,’ he said, citing complaints from exchanges. He added that the administration had convened a ‘study group’ to examine those issues, but said it was ‘very early’ in its deliberations.”
WORLD BANK JOINS WARNINGS ABOUT GLOBAL GROWTH — Bloomberg’s Sarah McGregor and Jeff Kearns: “World Bank President David Malpass said the global economic outlook is deteriorating amid Brexit-related uncertainty, trade tensions and a downturn in Europe.”
HEART ATTACK COMPLICATES THINGS FOR SANDERS — Our Holly Otterbein and David Siders: “Bernie Sanders has been sidelined for nearly a week — after failing for almost three days to disclose that he had a heart attack. It’s unclear when the 78-year-old senator will return to the stump. His campaign has yet to divulge the severity of his heart attack.
“And that sequence of events unfolded as he’s been eclipsed in the polls by the other progressive icon in the race, Elizabeth Warren. Now Sanders and his campaign are laboring to contain the cloud of uncertainty that’s formed over his candidacy.”
WALL STREET AND #METOO — The Intercept’s Susan Antilla: “At a time when the long-term consequences of #MeToo on women’s careers is an open question, the lessons from Wall Street’s moment are sobering.
“We scoured court records, tracked down women plaintiffs and defendants in those marquee lawsuits, examined records in the arbitration database kept by the Financial Industry Regulatory Authority, or FINRA, and spoke with a dozen employment lawyers who had collectively handled thousands of discrimination cases over the years.”
NEW FROM McKINSEY ON RACE AND AUTOMATION — New research from McKinsey “shows that African American workers are disproportionately represented in occupations and geographic areas where automation has higher risks of job displacement. The findings show that the challenges automation poses are not uniform—gender, education, and age can all factor into a worker’s risk.”