Israel Launches Pre-Emptive Military Operation Against Hezbollah Targets in Lebanon

Canada rail situation | Sizing up Harris’ campaign | Inflation watch | Federal court to hear FTC’s case against Kroger/Albertsons merger

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August 25, 2024 09:37 AM

The Week Ahead: Aug. 25, 2024

— The latest political joke is that if Democratic presidential candidate Kamala Harris keeps sounding more moderate to conservative, she could run as the next GOP presidential candidate. This dispatch looks at key words the Democrats are using… words and phrases typically spouted by Republicans.

— Robert F. Kennedy Jr. on Friday, as expected, suspended his long-shot candidacy and endorsed Trump. Kennedy said he would remain on the ballot in some states but take his name off the ballot in “about” 10 battleground states. Kennedy announced his decision during a speech in Arizona, where he criticized the Democratic Party and expressed his belief that the political system is biased against independent candidates. The endorsement is seen as part of a strategic move by Kennedy to maintain influence over his key issues, such as vaccine skepticism and health policy, while stepping back from the presidential race to avoid splitting the vote in battleground states. The impact of Kennedy’s endorsement on the election remains uncertain. While Trump hopes to gain support from Kennedy’s followers, public polls indicate that the effect may be limited. Kennedy’s support had dwindled to around 5% in recent polls, and his influence in the race is debated among political analysts. Trump’s campaign in a memo said that its most recent polling shows that Kennedy’s supporters break for Trump in seven battleground states, sometimes by large margins.

A Wall Street Journal editorial (link) says the endorsement is “best understood as a double-edged political sword. It may help the former President in battleground states, but the price could be high if it includes putting Mr. Kennedy in a second Trump Administration.”

— Canada Industrial Relations Board orders rail workers back amid major labor dispute, union plans appeal. Details below.

— Early on Sunday, Israel launched a significant military operation against Hezbollah targets in Lebanon, deploying around 100 jet fighters to strike dozens of locations. This pre-emptive action was taken as Israel detected Hezbollah preparing for an extensive missile and rocket attack on northern and central Israel. The Israeli military targeted launchers in 40 locations across southern Lebanon.

The tensions between Israel and Hezbollah have been escalating, particularly after the assassination of a senior Hezbollah commander in Beirut in July, which Hezbollah had vowed to retaliate against. In response to the Israeli strikes, Hezbollah launched an attack involving more than 320 rockets and drones aimed at Israel. Despite the large number of projectiles, there were no reported casualties, and some of the rockets were intercepted by Israeli defense systems.

The situation has heightened concerns of a broader conflict in the Middle East, with both sides exchanging heavy fire. Israel has declared a “special situation on the home front,” allowing the military to issue public safety directives, including restrictions on gatherings. The international community, including the United States, has expressed concern over the escalating violence, with the U.S. affirming its support for Israel’s right to self-defense.

— On Monday, a bipartisan congressional task force investigating the July 13 assassination attempt on former President Donald Trump in Butler, Pennsylvania, will visit the scene and issue a final report by Dec. 13, recommending legislative reforms to prevent future security lapses.

WASHINGTON FOCUS

Now that both political conventions are over, the presidential and congressional elections begin their home stretch with the most significant action, including updated polls, coming after Labor Day.

The House and Senate are on their summer break and aren’t scheduled to return to Washington until Sept. 9.

— Key questions now surround Democratic presidential candidate Kamala Harris: How would she govern on issues like the economy, climate, and foreign policy? Her vice-presidential record offers limited insight since she wasn’t the decision-maker in the Biden administration. Harris has shifted positions on several issues, including health care, border policy and fracking, since her 2020 presidential run. Some of her recent proposals, such as large handouts for homebuyers and a rule against alleged grocery price-gouging, have been criticized as economically flawed.

The Economist analyzed (link) Harris’ public remarks since becoming the likely Democratic nominee. The magazine said it reveals a consistent and disciplined messaging strategy, though it lacks detail. Her most frequently used phrase, “We are not going back,” contrasts sharply with Donald Trump’s candidacy. She often discusses Project 2025, a conservative plan for the presidency that Democrats criticize (and Trump denies he is following), and frames policy discussions around defending freedoms, such as voting rights and reproductive rights. However, the article says Harris notably avoids certain topics. She rarely mentions climate change, which has been central to the Biden administration, and does not frame the election as a battle between democracy and autocracy, unlike President Biden. Additionally, there are no references to China, despite its significance as a geopolitical rival.

Kamala Harris’s recent speech in Raleigh outlined her economic agenda, which the article says aligns with Bidenomics but with more populist elements. She emphasized maintaining industrial policy, capping insulin prices, and expanding federal authority to negotiate drug prices. Her campaign is also consulting with Biden’s economic advisors.

To address voter concerns over inflation, Harris proposed a federal ban on food price-gouging and a $25,000 tax credit for first-time homebuyers, though these ideas have drawn criticism for their potential economic impact. She also endorsed Trump’s proposal to eliminate income tax on tips, leading to accusations of policy plagiarism.

Harris’ approach to foreign affairs remains less clear, the Economist explains. Her experience as vice-president and her stance on major foreign-policy challenges, like the withdrawal from Afghanistan and competition with China, suggest she would likely continue Biden’s approach. However, the article concludes, her specific policies are not well-defined, and she has shown concern for humanitarian issues, particularly in Gaza.

Bottom line: The article says Harris’ campaign is marked by a strategic vagueness, possibly to manage expectations given the likelihood of divided government. Despite this, it says, Democrats are optimistic about winning back the House, while Republicans are expected to take the Senate.

— The use of key political terms in relation to the Democratic and Republican parties has evolved over time, particularly in the context of presidential elections. Vice President Kamala Harris’ recent policy pronouncements have highlighted the term “opportunity economy,” which serves as a central theme in her campaign. This term, while traditionally associated with Republican rhetoric, has been adapted by Harris and the Democratic Party to frame their economic policies.

The following is a table summarizing the evolution of key terms and their associations with the Democratic and Republican parties:

Term	Democratic Party Usage	Republican Party Usage
Opportunity Economy	Used by Kamala Harris to describe policies aimed at increasing economic opportunities for all, including aid to parents, home buyers, and small businesses.	Historically used to emphasize equality of opportunity, not outcomes, with initiatives like “Opportunity Zones” under Donald Trump.
Freedom	Emphasized in the context of reproductive rights (the Dems’ word for abortion) and economic equality.	Often associated with individual liberties and limited government intervention.
Unity	Promoted as a core Democratic value, opposing divisive policies.	Used to convey national solidarity but criticized by Democrats for not aligning with policy actions.
Equality of Opportunity	Focused on expanding access to education and economic resources, less emphasis on four-year degrees.	Advocated as a principle without supporting quotas, emphasizing merit-based systems.
Equity	Previously highlighted by Harris, though less mentioned in recent speeches, including less-popular connotations of redistribution and diversity. Replaced by: Opportunity.	Less emphasized, with a focus on equality of opportunity, not equality of results.

— Canada Industrial Relations Board orders rail workers back amid major labor dispute, union plans appeal. In response to a labor dispute involving Canada’s two largest railways, Canadian National Railway Co. (CN) and Canadian Pacific Kansas City Ltd. (CPKC), the Canada Industrial Relations Board (CIRB) mandated that workers return to their jobs and engage in binding arbitration. This decision comes after a shutdown of operations on Aug. 22, 2024, following failed negotiations between the railways and the Teamsters Canada Rail Conference, which represents nearly 10,000 workers.

The CIRB’s ruling was prompted by a request from Labour Minister Steven MacKinnon, who argued that the work stoppage posed significant risks to Canadians’ livelihoods, safety, and communities. The tribunal’s decision was unanimous, and it emphasized that it had no discretion to alter the minister’s directives.

The order requires the railways to resume operations immediately, with CN already restarting its trains and CPKC expected to follow by 12:01 a.m. on Monday. CPKC said it has ended its lockout. Employees are expected to resume their duties at 12:01 a.m. New York time on Monday. “We are working with customers on a balanced return to normal operations,” the railway said.

The tribunal directed parties to attend a meeting on Aug. 29 about the implementation of the arbitration process.

The decision also extends the workers’ expired contracts and nullifies any strike notices.

While the Teamsters union has agreed to comply with the order, it plans to appeal the ruling in Federal Court, arguing that it sets a dangerous precedent by undermining workers’ rights and enabling corporate interference. The union is concerned that the government’s intervention diminishes the ability of labor unions to negotiate for better wages and working conditions.

The labor dispute centers around issues such as scheduling, crew fatigue, and proposed changes to the compensation system. The railways had suggested switching from a mileage-based pay system to one based on hours worked, which they argued would allow for more predictable time off. However, the union opposed this change, fearing it could erode protections against fatigue and compromise job safety.

The disruption had significant economic implications, as CN and CPKC collectively handle about 80% of Canada’s rail network and transport goods worth approximately C$1 billion (US$740 million) daily. The stoppage affected the supply chain for essential commodities like coal, wheat, fertilizer, and lumber.

— Perspective on Canada rail situation. Shaun Haney of reagriculture.com (and a frequent participant on Friday’s AgriTalk program, (link), wrote a column (link) reflecting on the recent shutdown of railways across Canada and raised several key questions and concerns:

• Economic impact: Haney questions whether the economic costs of the rail strike and lockout were worth the disruption. He points out that the shipping slowdown in anticipation of the strike caused significant economic damage, highlighting the need for long-term solutions to prevent such labor impasses from crippling Canada’s economy.
• Long-term solutions: Haney questions the political will to address ongoing labor disputes, noting that similar stoppages have repeatedly harmed key industries like agriculture. He suggests that Canada needs to find a balance between respecting collective bargaining rights and avoiding widespread economic disruption.
• Political implications: The column discusses the political silence surrounding the strike, especially from the Liberals and Conservatives, who are both vying for blue-collar votes in the upcoming election. Haney notes the growing political power of unions, particularly in comparison to traditional voter blocs like Quebec dairy farmers.
• Agriculture Ministry’s silence: Haney criticizes Agriculture Minister Lawrence MacAulay for his lack of response during the strike, questioning the purpose of having a Ministry of Agriculture if it doesn’t advocate for the industry during such critical times.
• Lack of understanding of supply chains: Haney laments that, despite the disruptions of the pandemic, there remains a lack of understanding among Canadians and politicians about the importance of supply chains. He argues that this apathy threatens the resilience of Canada’s economy.

Bottom line: Haney calls for a deeper examination of how Canada handles labor disputes and their broader implications on the economy and political landscape.

— Federal court to hear FTC’s case against $25 billion Kroger/Albertsons merger. On Monday, a federal court will hear the Federal Trade Commission’s (FTC) case against the proposed $25 billion merger between Kroger and Albertsons. The merger, initially proposed in October 2022, has faced significant opposition from states and unions, who argue that it could negatively impact shoppers and workers. Kroger is pushing for the courts to handle the case and is suing the FTC to prevent the regulator from using its in-house tribunal to decide the matter.

ECONOMIC REPORTS & EVENTS

Inflation readings will be the highlights in the coming week. Meanwhile, Fed Chair Jerome Powell on Friday morning said the time has come for the Federal Reserve to cut its key policy rate, affirming expectations that officials will begin lowering borrowing costs at the Sept. 17-18 FOMC meeting (link for details).

The Federal Reserve’s preferred inflation metric, the personal consumption expenditures (PCE) index, on Friday is expected to show a slight increase in July. Despite this, the broader trend of slowing inflation and a weakening labor market is likely to keep the Fed on track for a rate cut at the Sept. 17-18 FOMC confab. Traders anticipate at least a quarter-point cut, with a chance of a larger half-point reduction.

Monday, Aug. 26
• Durable Goods Orders (July 2024): This report provides data on new orders placed with domestic manufacturers for delivery of factory hard goods in the near term. It is a leading indicator of manufacturing activity.
• Dallas Fed Manufacturing Index
• Federal Reserve: San Francisco Fed President Daly TV interview

Tuesday, Aug. 27
• S&P/Case-Shiller Home Price Index (June 2024): This index measures the change in the value of the U.S. residential real estate market, providing insights into housing market trends.
• Conference Board Consumer Confidence Index (August 2024): This index measures consumer confidence, which can indicate consumer spending trends.
• House Price Index
• Richmond Fed Manufacturing Index

Wednesday, Aug. 28
• MBA Mortgage Applications
• Federal Reserve: Atlanta Fed President Raphael Bostic speech

Thursday, Aug. 29
• Jobless claims
• Gross Domestic Product (GDP), 2nd Quarter 2024 (Second Estimate): This report provides a comprehensive measure of U.S. economic activity, indicating the pace of economic growth.
• Corporate Profits (Preliminary, 2nd Quarter 2024): This data provides insights into the profitability of U.S. corporations, which can impact stock market performance.
• Advanced U.S. trade balance in goods
• Advanced retail inventories
• Advanced wholesale inventories
• Pending home sales
• Fed Balance Sheet
• Money Supply
• Federal Reserve: Atlanta Fed President Raphael Bostic speech

Friday, Aug. 30
• Personal Income and Outlays (July 2024): This report includes data on personal income, consumer spending, and the personal consumption expenditures (PCE) price index, which is a key indicator of inflation.
• Chicago Business Barometer (PMI)
• Consumer sentiment (final)
• Michigan Consumer Sentiment

KEY USDA & INTERNATIONAL AG & ENERGY REPORTS & EVENTS

Statistics Canada’s data on production of crops such as wheat and canola will be published Wednesday.

Monday, Aug. 26

Ag reports and events:

Export Inspections
Peanut Stocks and Processing
Crop Progress
JRC MARS bulletin on crop conditions in Europe
Malaysia’s Aug 1-25 palm oil exports
Holiday: UK, Bangladesh, Iraq