The credit markets can watch 12 hours of Clintonomics on C-SPAN over the next two days, and what they see could determine the course of interest rates.
President-elect Bill Clinton will act as moderator at a conference of 300 corporate executives, small-business owners, and economists who will gather in Little Rock to discuss trade, training, the deficit, the national debt, savings and investment, and other topics in an effort to shape the incoming administration's fiscal policy. No set of recommendations will be written, but the tone of the sessions could influence interest rates during the wait for Clinton's inauguration.
Last Thursday, the President-elect named his economic team, a remarkably conservative group whose makeup had already caused the credit markets to advance modestly in price. On Friday bond prices dipped even though the consumer price index showed an increase of only 0.2% for November.
The market's setback was not linked to the index; rather, it was retail sales that made bond traders timid. Retail sales in November increased 0.4%, which was about twice as large a gain as money market economists had projected. October's increase was revised upward to 1.9% from 0.9%.
This bond market response was different from a week earlier. On Dec. 4, a larger-than-expected drop in unemployment was followed by a rise in bond prices, ostensibly on the reasoning that a less sluggish recovery would keep Clinton from overdoing fiscal stimulus. Last Friday's retail sales revision was additional evidence that the economy might not need fiscal help, but a revision that size may make people think the recovery might be gaining real strength at last. If so, that strength would mean a setback for bond prices.
In any case, the Little Rock economics seminar will take place amid brightening prospects, and that means the talk should emphasize size the deficit, savings and investment, training, international trade. If the conference looks at something more than quick fixes, the credit markets will continue toward higher prices and lower yields. With Clinton presiding, that seems likely.
So tune in today and tomorrow and find out what Clinton and his team think they're going to achieve. On paper at least, this troupe has the best credentials of any postwar administration, and it may achieve something.