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Final Acts 

Bloomberg has an interesting article worth discussing: Lame-Duck Trump Has Potential to Upset Markets With Final Acts

After President-elect Joe Biden’s win is certified, Trump will enter the so-called lame duck phase of his presidency with a capacity for disruption that is formidable. Any number of executive decisions might leave investors on tenterhooks. Already, he’s ousted his defense chief and remade the leadership at the Pentagon.

Disputes with China spanning commerce, technology and human rights, the trade spat with Europe, and the upcoming deadline on U.S. government funding in December all offer the potential for market-moving action. The current Congress remains in place through the end of the year. Earlier this week, Secretary of State Michael Pompeo said the Trump administration is “not finished yet” with getting tough on China.

“An aggrieved and outgoing President Trump may not be in a very cooperative mood, resulting in a shutdown-standoff that could bruise an already ailing U.S. economy burdened with an ongoing pandemic,” wrote Gabrielle Debinski of GZERO Media, a subsidiary of the Eurasia Group political risk consultancy. “The upcoming lame-duck session could be more tumultuous than ever.”

Domestic political maneuvers and presidential pardons are a traditional feature of lame-duck periods of departing American leaders, and one that on the face of it shouldn’t have much market impact.

But Mark Tinker, a former Axa SA strategist and founder of Market Thinking Ltd., raises the possibility that an attempt to settle scores with political insiders might lead to some disruption.

“One intriguing suggestion is that between now and inauguration, Trump, with little to lose, could simply de-classify large amounts of documents pertaining to the activities of what he has always referred to as ‘The Swamp,’” Tinker wrote in a note Tuesday. “Whether the markets are prepared for that remains to be seen.”

The Threats

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  1. China: Ho hum. Trump has escalated threats against China for years. 
  2. Pardons: Every president has a barrage of poor pardons and a few good ones they should have made earlier. Snowden deserves a pardon but won't get one.
  3. Declassification: Please do! The more the better. 
  4. Covid package: If a bipartisan package emerges, Trump will either sign it or risk being overridden.
  5. War: That is the key thing the article did not discuss but should have. Who really knows what Trump might try in Iran? 

Biden can and hopefully will reverse the Iran embargo but he cannot reverse bombings.

Declassification would be welcome and most of the other threats, except war, Biden can easily reverse.