Frank Kelly’s Geopolitical Week Ahead | July 15, 2024

It will be an extraordinary week ahead. As the U.S. and the rest of the world struggle to understand the assassination attempt on former President Trump, the Republican Presidential Convention begins Monday, and we will learn in the next day or two who will be Trump's Vice-Presidential running mate.

Meanwhile, we expect that U.S. Democratic leaders will continue to discuss and pressure President Biden to withdraw from running for President – something the President has made clear he has no intention of doing. Polling data will be poured over perhaps more intensely than ever before, mainly to see the downstream implications for House, Senate, and gubernatorial races.  We will be writing separately about all of this over the week as the event develops.

China: Third Plenum meetings

In Beijing, the Chinese Communist Party convenes for their long-awaited Third Plenum meetings. Markets will mainly focus on what is said and decide how to further stabilize the Chinese economy in the wake of the ongoing real estate crisis and economic challenges. 

Also, in Asia this week, the 10th Pacific Islands Leaders Meeting will be held in Tokyo, Japan. Leaders will participate in the three-day summit-level meeting to discuss climate change and fisheries, but China's growing military presence in the region and impact on security and trade will be addressed.

Europe

In Europe, the new EU Parliament gets under way, formally organizes itself, and officially names Ursula von der Leyden as President for a second term. In London, King Charles gives the King's Speech to Parliament, laying out the legislative agenda of newly elected Prime Minister Kier Starmer and the Labor Party majority.

And in Paris, the French National Assembly meets for the first time since the elections to attempt to hammer out some sort of coalition arrangement and pick a new prime minister.  It is likely to be a prolonged and messy effort.

Global radar screen

Looking at the global radar screen this week, markets are watching the European Central Bank meeting to see if the central bank moves to lower rates again—which most economists are not expecting. 

Also, in Europe, the UK releases inflation figures, Germany publishes PPI figures, and as mentioned above, King Charles' speech will lay out the UK's economic agenda going forward.

Looking to Asia, China releases its Second-Quarter GDP, and Japan publishes its CPI print.   In the US, Fed Chair Jay Powell participates in a fireside chat with Carlyle Group Founder and Chair David Rubinstein (a terrific interviewer!) to discuss the economy and likely shed more light on when the Fed will begin to move on cutting rates.

U.S. financial regulatory week ahead

Washington was preparing for the festivities and news of the Republican National Convention this coming week and instead is shocked and numbed by the assassination attempt on former President Donald Trump. This all comes as Democrats continue to battle internally over whether President Joe Biden should withdraw from the presidential race –  a fight we expect to be amplified and intensified this coming week.

With these two extraordinary, indeed historic, situations dominating our attention this week, the financial regulatory world will be relatively quiet this coming week. The big events we will be watching this week are the joint regulatory meetings of the Federal Reserve, Office of the Comptroller of the Currency, and U.S. Treasury on Friday to hear public views and concerns over the pending Capital One acquisition of Discover. While we do not expect the regulators to reveal their view of the deal, we will get a clear sense of how hard and loud public interest groups will oppose the deal. 

Also this week, Fed Chair Jay Powell will participate in a fireside chat with Carlyle Group Founder and Chair David Rubinstein. This should be quite interesting, as Rubinstein has proven that after founding one of the world's biggest private equity firms, he has become a first-rate interviewer who drills in issues with whomever he's talking to. We suspect the pending bank capital rule and other regulatory issues will get a fair share of the focus, along with Powell's views of the economy. 

Looking back at last week, the nomination hearing of Christy Goldsmith Romero in the Senate Banking Committee proved to show strong Democratic support for her. In contrast, Republicans showed particularly intense concern and opposition. Romero handled herself well under tough questioning, but we still believe it will be a heavy lift for her to be confirmed this year.

Also, Fed Chair Powell testified before the House Financial Services Committee and Senate Banking Committees last week.  Powell was clear that the bank capital rule is being rewritten, but he indicated that regulators are split on how the final rewrite will look.  He also said regulators are not obliged by the Dodd-Frank Act to issue a formal rule prohibiting compensation plans that encourage excessive risk-taking — a surprise for many.

Finally, Senate Agriculture Committee Chair Debbie Stabenow (D-MI) announced she will release a draft crypto regulation bill this week.  But, like Christy Goldsmith Romero's chances of getting confirmed, we do not see enough time on the Senate calendar this year to get it passed.