Low interest rates and quantitative easing should extend the stock market bubble and keep the debt-ridden U.S. consumer afloat until after the election. If President Trump obtains an interim trade deal with China until after the election, this should seal his re-election chances in 2020.

Fed fund rate cuts of 25 basis points in July, October and December 2019, and June 2020, could act as a tailwind for the economy. 

Because of a spike in repo rates in September, the Fed had to expand its balance sheet by $176 billion in three weeks, to provide liquidity for treasury dealers. Analysts at Morgan Stanley, B of A and Goldman Sachs believe the Fed will have to increase its balance sheet with as much as $400 billion, and buy treasuries in 2020, to fund banks with sufficient reserves, as the Treasury floods the market with debt to finance our $1-trillion deficit.  

Joe Biden’s age and the scandal with his son, Hunter, apparently have replaced him as the top Democrat in the 2020 presidential race. Bernie Sanders’ heart attack and his age have apparently removed his chances. 

Sen. Elizabeth Warren is on a trajectory to be the Democratic presidential nomination in 2020. However, because of her far-left positions on fossil fuels and the economy, she does not appear to be electable. Many independents and blue-collar union workers will never vote for a socialist. Many Democrats on Wall Street will sit out the 2020 election or vote for Trump rather than voting for Senator Warren. 

Because of President Trump’s salesmanship, his unlimited energy and the prayers of many evangelicals, he seems unstoppable.

The Trump impeachment proceedings are a nonstarter, because a conviction would require a three-quarters majority in the Senate - and Republicans control the Senate. 

The combination of low unemployment, a failed impeachment and a weak Democratic presidential candidate may give the Republicans the House in 2020, and President Trump a clear path to a repeat victory.  

Steve Johnston

Brookings

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