US: Further debt ceiling standoffs likely with real recession risks in 2020 – Nordea Markets

In the US, more battles regarding funding the government and raising the debt ceiling are no doubt ahead, especially as Trump is still seeking funding for his wall promise on the Mexican border, according to Jan von Gerich, Global Fixed Income Strategist for Nordea Markets.

Key Quotes

“While such compromises have already lately required bipartisanship due to the 60-vote supermajority need in the Senate, which the Republicans have not had, finding a compromise with a Democratic-controlled house may prove more difficult.”

“An escalating trade war and increased uncertainty about the policy course will be a burden for sentiment. Further, a divided Congress is unlikely to be able to prevent fiscal policy from tightening in 2020, which will happen under current law.”

“Tightening fiscal policy together with tighter monetary policy it set to hit growth especially in 2020, increasing the odds of the US economy hitting recession that year.”