These weren’t the geopolitical risks that Wall Street had in mind

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Jul 15, 2024 View in browser   By Sam Sutton Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. QUICK FIX On Friday, the threat of domestic upheaval was still mostly an academic exercise. By Sunday morning — in the aftermath of the attempted assassination of former President Donald Trump onstage at a rally in Pennsylvania — the editorial pages of The Financial Times and Wall Street Journal were urging moderation as U.S. political leaders confronted fears of a sustained period of political violence in the run-up to the 2024 election. Wall Street executives have warned for years about how geopolitical conflicts threaten the global economy. Political polarization in the U.S. is often cited among those risks. JPMorgan Chase CEO Jamie Dimon as recently as Friday wrote in a second-quarter earnings release that the “geopolitical situation remains complex and potentially the most dangerous since World War II.” But those warnings rarely get specific about how dangerous the divisions within the U.S. have become and how hard it will be to mend those fractures. There are exceptions, of course. Ray Dalio, the billionaire founder of the hedge fund Bridgewater Associates, published an article in Time last month where he posited that the possibility of a U.S. civil war now stands at “uncomfortably more than 50 percent.” “A clash between state governments and a fractured central government appears likely, which I would regard as a type of civil war even if not violent,” he wrote. “If things get bad enough, some Americans will flee to other countries and foreigners will choose not to be here. Such disorder would also not be good for rule-of-law and our capital markets.” Even if that forecast seems far-fetched — Dalio has made plenty of predictions about downturns and conflicts that never came to pass — Trump’s shooting does not diminish its likelihood. It’s a possible tail risk if there’s more violence in the coming weeks or months. (Dimon over the weekend sent a message to his bank’s employees urging them to stand against “any acts of hate, intimidation or violence that seek to undermine our democracy or inflict harm.”) Trump urged the country to “stand united” in the aftermath of the attack. President Joe Biden said that “we must not go down this road” from the Oval Office on Sunday night. House Speaker Mike Johnson told NBC that “we’ve got to turn the temperature down in this country.” Those comments reflect the stakes. “This is a moment where I think we have to recognize that we can’t have rhetoric that encourages political violence,” David McCormick, the Republican Senate candidate from Pennsylvania who previously worked for Dalio at Bridgewater Associates, said on Fox News on Sunday. Between the Trump assassination attempt, the attack on former House Speaker Nancy Pelosi’s husband, and the threats made against Supreme Court justices, “it’s hard to imagine that this polarized violent rhetoric isn’t contributing to the violence we’re seeing,” he said. “We’re going to have a conflict of ideas. But that doesn't have to lead to conflict that becomes violent,” McCormick said. “We can disagree mightily on ideas and still be able to find a way to come together as Americans.” IT’S MONDAY — I hope you’re staying safe. As always, send tips and suggestions to ssutton@politico.com and @samjsutton. If you’re in Milwaukee, say hey to Victoria Guida (vguida@politico.com) and Zach Warmbrodt (zwarmbrodt@politico.com). And if you can’t make it, be sure to catch their POLITICO Grill panels online.   Understand 2024’s big impacts with Pro’s extensive Campaign Races Dashboard, exclusive insights, and key coverage of federal- and state-level debates. Focus on policy. Learn more.     Driving the Week Monday … The Republican National Convention kicks off in Milwaukee … Federal Reserve Chair Jerome Powell will be interviewed at an Economic Club of Washington event at noon … Tuesday … U.S. retail sales data for June will be released at 8:30 a.m. … Fed Gov. Adriana Kugler will speak at the 21st Annual National Association for Business Economics Foundation Economic Measurement Seminar at 2:45 p.m. … Wednesday … Housing starts and building permits data for June will be released at 8:30 a.m. … Richmond Fed President Thomas Barkin will deliver informal remarks on the economy before the Greater Prince George's Business Roundtable at 9 a.m. Thursday … U.S. leading economic indicators will be out at 10 a.m. …  Dallas Fed President Lorie Logan, San Francisco Fed President Mary Daly and Fed Gov. Michelle Bowman are all slated to speak at a conference hosted by the Dallas and Atlanta Federal Reserve Banks that begins at noon … The SEC has a closed meeting at 2 p.m. Friday … New York Fed President John Williams will participate in a panel at a conference organized by by the Central Reserve Bank of Peru, Reinventing Bretton Woods Committee and Inter-American Development Bank at 10:40 a.m. … Atlanta Fed President Raphael Bostic will deliver the closing keynote at the Atlanta and Dallas Fed’s conference at 1 p.m. Blaming the other side — While some political leaders have sought to calm the waters following Saturday’s attack. For others, “it was right back to reflexive criticism of the media, vitriol for the other side and conspiracy theories,” writes POLITICO’s Michael Schaffer. Corporate America reacts — Billionaire Elon Musk and hedge fund manager Bill Ackman publicly endorsed Trump shortly after the shooting. Reid Hoffman, the founder of LinkedIn and a Democratic megadonor, also took to X to denounce the attack and clarify an earlier statement — reported by Puck’s Dylan Byers — in which he had said he wanted to make Trump a “martyr.” — One of Hoffman’s top advisers, Dmitri Mehlhorn, apologized after suggesting that the attack may have been “staged,” Semafor’s Kadia Goba reports. — Yahoo Finance’s Ben Werschkul: “Business leaders condemn political violence after Trump injured in shooting” — Polls taken after Biden’s disastrous debate performance, but before the assassination attempt, suggest that the presidential race is still close, writes Steven Shepard. But market participants are ramping up investments that would likely perform favorably in the event of a second Trump administration, write Sydney Maki and Elena Popina for Bloomberg. Crypto The Crypto Convention — Crypto executives will be at the Republican convention in force, Jasper Goodman reports. “This election year, crypto has become a political issue,” said Ripple chief legal officer Stuart Alderoty, who will attend alongside CEO Brad Garlinghouse. “It would be irresponsible if we didn’t engage completely in this election cycle. So what that means, in part, is showing up at both the Republican convention and the Democratic convention.” — Zach Warmbrodt reports that The Atlantic Council's GeoEconomics Center is out today with new findings from its cryptocurrency regulation tracker, which goes in-depth on digital asset rules in 60 countries. A big takeaway: 70 percent of the countries studied are in the process of making substantial changes to regulations, and often through new legislation. Stablecoin rules are poised to be the next wave. Only 19 of the countries analyzed have comprehensive frameworks in place for taxation, money laundering, consumer protection and licensing.   SUBSCRIBE TO GLOBAL PLAYBOOK: Don’t miss out on POLITICO’s Global Playbook, our newsletter taking you inside pivotal discussions at the most influential gatherings in the world. Suzanne Lynch delivers the world's elite and influential moments directly to you. Stay in the global loop. SUBSCRIBE NOW.     At the regulators The Chevron spillover — Dozens of business groups are pressuring the Biden administration to halt rulemaking in the aftermath of the Supreme Court’s dismantling of a legal precedent, known as Chevron deference, that protected rules issued by federal agencies, reports Lawrence Ukenye. Antitrust regulators target the rental market — The Justice Department is preparing to take on what it says is collusive conduct in the rental housing market, Josh Sisco reports. DOJ is planning to sue a software company that it believes allows large landlords to fix prices. More rental market news — The Federal Housing Finance Agency on Friday rolled out new tenant protections for apartment buildings financed by Fannie Mae and Freddie Mac, Katy O’Donnell reports. The Economy Classic millennial anxiety — Workers who are in the middle of their careers are saving more over fears that Social Security benefits won’t be available to them when they retire, The WSJ’s Joe Pinsker reports. Fly Around More rate cuts? — European Central Bank officials might start priming investors for another rate cut, Craig Stirling and Marilen Martin report for Bloomberg. China’s debt problem — Off-the-books financing helped power the rise of China’s economy during the 21st century. The spigot has closed and as much as $800 billion of that debt is at a high risk of default, report Brian Spegele and Rebecca Feng for The WSJ.   Follow us on Twitter Mark McQuillan @mcqdc Zachary Warmbrodt @Zachary Victoria Guida @vtg2 Declan Harty @ @declanharty Eleanor Mueller @eleanor_mueller Katy O'Donnell @katyodonnell_ Sam Sutton @samjsutton   Follow us

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