The trade is via options on eurodollar futures, and it’s been building in size over the past week. The ramp-up coincides with polls suggesting a growing chance of a Democratic sweep of both the White House and Congress in the Nov. 3 elections. For many investors, that scenario would pave the way for a significant fiscal-spending package, potentially hastening the economy’s rebound from the pandemic and causing inflation to accelerate toward the Fed’s goal.
The bet is that Biden will go California Wild on spending. I doubt it. I expect nothing to happen on stimulus of any consequence. It will be a full quarter of tax shuffle to deal with new and old tax structure. The great uncertainty are the tax initiatives in California an Illinois. Then comes New York which will have to adjust taxes. No real stimulus until we find out who is ultimately taxed. We might get something small, a half trillion at best. And in any event the increased Fed taxes will enforce the deflationary trend.
No comments:
Post a Comment