Premarket Shares: Janet Yellen is headed for Congress. The stakes were never higher


What happens: Yellen must not only make an effort to get the U.S. economy back from the strongest contraction in the record – it must also persuade Congress to join Biden’s $ 1.9 trillion stimulus package as some lawmakers step down from the price.

“When economists look back at the pandemic, I expect them to conclude that the actions of Congress have averted much suffering,” Yellen tells lawmakers, according to a written statement from CNN Business. “But more needs to be done. Economists don’t always agree, but I think there’s a consensus now:

Without further action, we are now risking a longer, more painful recession and later a long-term scarring of the economy. “

Wall Street expects Congress to support the Biden administration by passing another major aid bill that will result in millions of millions of Americans still unemployed and an increase in new jobless claims.

But scale can be an important point of attachment: Biden’s team is pushing for an additional $ 1,400 in incentive checks, support from state and local governments, and a wave of funding for Covid-19 vaccination and testing.

One of Yellen’s biggest challenges will be convincing more conservative lawmakers that the benefits of increasing the U.S. $ 27 trillion debt burden outweigh the costs.

“Neither the president-elect nor I will recommend this aid package without estimating the country’s debt burden,” Yellen said in a prepared statement. “But now, with interest rates at historic lows, the smartest thing we can do is act big.”

Yellen has a question: The U.S. can borrow at roughly 1% for 10 years, compared to about 3% when former President Barack Obama took office. But if interest rates were to rise, servicing the country’s debt burden could become more difficult.

Given Yellen’s Fed background, he can speak with authority on these issues, as well as concerns about inflation caused by further spending. Investors will listen.

“There are a number of questions to be said about debt sustainability and the Fed’s likely role in this,” Jim Reid, Deutsche Bank, told clients in a note on Tuesday.

Personal Note: In his prepared remarks, Yellen also cites the background of the “working class” in Brooklyn, where his father, a doctor, treated people from the basement of the family.

“He was a doctor who treated the whole patient,” she reads in her prepared remarks. “He knew about their lives; about when they were fired or they couldn’t pay. These are one of the cleanest moments of my childhood.”

Banking income mixes optimism and uncertainty

Banking results indicate that the outlook for the economy is expected to improve by the end of the year.

The last: JPMorgan Chase (JPM) – which recorded a record $ 12.1 billion gain from the fourth quarter on Friday – said it released $ 2.9 billion in reserves to cover bad loans.

This is a sign that the bank believes that the economic situation is getting better, not worse, thanks to vaccination programs and incentives.

In a conference call with CEO Jamie Dimon, the country could have a “very healthy economy” by the summer – especially if unemployed Americans and small businesses “who are in dire need of help” receive more incentive payments from the incoming Biden government and Congress.

However, he stressed that a lot remains unknown. The bank still has more than $ 30 billion in credit reserves as a cushion in case conditions worsen. And in addition to mortgages experiencing a pandemic recovery, consumer lending continued to be silenced.

Investor Insight: JPMorgan ‘s results seemed better to investors than Citigroup (C) and Wells Fargo (WFC). Attention is now turning to him american bank (BAC) and Goldman Sachs (GS), which will announce the results on Tuesday.

Goldman may be the one watching, given how busy investment bankers have been in the last quarter. Companies are in a hurry to raise capital as they prepare for the next stage of the business cycle. Trading revenue also seems healthy.

China’s weak growth is envied by the world

If it were to classify the world’s largest economies on the basis of a curve, China would be first class.

The world’s second-largest economy grew 2.3 percent in 2020 from a year earlier, according to government statistics released Monday, writes my business colleague Laura He, CNN.

This is China’s slowest annual growth rate in recent decades. The country has had no worse year since 1976, when GDP fell by 1.6% at a time of social and economic turmoil.

But compared to other major world economies that went into a deep and prolonged recession, China took the lead. The expansion also exceeded estimates. The International Monetary Fund, for example, has predicted that China’s economy will grow by 1.9% in 2020. It is the only world economy that the IMF expected to grow at all.

Big picture: Economists say the momentum of the Chinese economy will be crucial to the global recovery in 2021. There was also good news in this area: GDP grew by 6.5% in the fourth quarter compared to a year ago, faster than the 4.9% growth in the third quarter.

The data underscores some of the problems that may still await. Industrial production soared while retail remained fragile.

This begs the question: Did the epidemic mislead China’s efforts to shift its economy from one that relied on production to that driven by consumer spending? If so, what does this mean for long-term growth prospects?

Following

American Bank, Goldman Sachs, Charles Schwab (SCHW) and the findings of the State Street report before the opening of U.S. markets. Netflix (NFLX) follows after closing.

Even today: Janet Yellen’s confirmatory hearing before the Senate Finance Committee begins at 10 a.m.

Coming tomorrow: Results from: Morgan Stanley (LITTLE) and Procter & Gamble (PG).