Investors may be preoccupied with the emerging market sell-off, but Washington is poised to shift attention back to the U.S. this week.
“This week’s three big events (State of the Union, House GOP Strategy Retreat, and Bernanke Retirement) have the potential to determine the course of the remainder of the year in D.C. macro policy,” Guggenheim’s Chris Krueger wrote to clients.
Krueger highlights the action:
Obama’s speech tomorrow night at 9 p.m. is likely to focus on income inequality and using executive branch tools to circumvent a gridlocked Congress. There will be three Republican lawmakers delivering responses to the President’s speech. House GOP Conference Chair Cathy McMorris Rodgers (R-WA) will deliver the official GOP response, Sen. Mike Lee (R-UT) will deliver the Tea Party response, and Sen. Ran Paul (R-KY) will deliver his own response. Three separate responses would suggest a lack of unity and cohesion among Washington Republicans as the “establishment”/Tea Party battle continues.
Then the House GOP will leave for their retreat, where they will “debate their plans on immigration reform and the debt ceiling,” Krueger notes.
The week will likely end with the unveiling of the “ask” for the House GOP to raise the debt ceiling in late February. Predictably, President Obama and Congressional Democrats have refused any quid pro quo and describe the expected policy “ask” as a ransom. Queue the choreographed fiscal brinksmanship for February.
On Wednesday, the FOMC will release its policy statement (Chairman Bernanke’s last).
“This FOMC meeting is not followed by a chairman’s press conference or an update of economic projections so we expect the FOMC will stick to the new trajectory on asset purchases established last December,” writes KBW’s
Plus: “The release of fourth quarter GDP on Thursday could also be market moving as could a congressional hearing on a new office within Treasury created under Dodd-Frank, which recently produced research on the asset management industry,” he writes.
So it’s a very busy week in the U.S., and it looks like we can expect the never-ending debt battle to heat up once again.
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