SUMMARY
Policymaking in Washington has not stagnated, but it continues to be weighted towards global macroeconomic policy adjustments (nearly all about tightening financial conditions), consequences of Europe and Russia’s war, the G2 competition, and energy fundamentals. Supply chains and pandemic news is either trending more positively or at least not worsening, for now.
Whether the world is approaching a policy doom loop unable to materially boost growth, will likely depend on fiscal and geopolitical authorities at least through this year and probably 2023. This cyclical phase is reminiscent of a decade ago when Bernanke as chair of the Fed, Draghi as president of the ECB, and others were begging for fiscal help to aid monetary inputs. A major difference now is that monetary policy authorities, ex-Asia, are openly pushing away from zero-bound rates or grudgingly embracing recession risk.
The events below are listed in terms of our sense of market priority; all times are eastern standard unless otherwise specified.
Tuesday
German Chancellor Scholz addresses the summer gathering of the Federation of German Industries, a meeting that privately, if not publicly, will manifest growing German/EU risks of balancing pushback against Russian President Putin and near-term growth. His remarks come a day after EU foreign ministers met in Luxembourg to digest feedback from Italian Prime Minister Draghi, French President Macron, and Scholz’s meeting with Ukrainian President Zelensky. That the word “fragmentation” has returned to popular journalism speaks to rising and differentiated EU members’ economic stress, not all related to war.
Wednesday
9:30 a.m.: at the Senate Banking Committee hearing, Fed Chair Powell will begin his two-day, semiannual congressional briefing of economic conditions and monetary policy plans. While not quite a punching bag, Powell will attempt to head off but still feel elected members’ channeling of their constituents’ unhappiness.
6:00 a.m.: the seventh annual IEA global energy investment report will be released. The usual assessment of capex indicators of industry and government policies relevant to energy transition policies, fundamentals likely drive the 2022 narrative.
10:00 a.m.: the Senate Commerce Committee is set to vote on legislation increasing scrutiny of Pharmacy Benefit Managers’ (PBMs) operations and pricing.
10:00 a.m.: the House Armed Services Committee begins final pre-floor composition of the FY23 annual defense authorization (another indicator of increased national security spending trends).
Thursday
10:00 a.m.: the House Financial Services Committee meets with Powell for day two of his semiannual congressional testimony. We expect Member questions to be more contentious in tone than those during his Wednesday appearance before the Senate (to put it politely).
11:00 a.m.: the Senate Foreign Relations committee will likely approve asking the State Department to designate Russia as a state sponsor of terrorism. Full Senate adoption of the resolution likely wouldn’t supersede existing, open-ended sanctions and export controls in place.
12:00 p.m.: EU leaders begin a two-day conference in Brussels to discuss progress toward EU integration and the impacts of Russia’s war in Ukraine on member states’ economies. Fragmentation realities evince war of attrition downsides, some caused by widely divergent underlying social, political, and economic conditions.
