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Biden has a lot to brag about, but ‘people aren’t buying it’: Strategist

AGF Investments Chief US Policy Strategist Greg Valliere joins Yahoo Finance Live to discuss key takeaways from President Biden’s State of the Union address, U.S. inflation, Fed policy, the expectations for the economy, and the outlook for markets.

Video Transcript

[AUDIO LOGO]

BRAD SMITH: President Biden struck an optimistic tone as he confronted a divided Congress in his State of the Union address last night, remaining determined even as he faced a series of confrontations and heckling from Republicans throughout his speech. Let's get a look at the overall turn and tone of the night and the big picture of Biden's State of the Union address with AGF Investments Chief US Policy Strategist Greg Valliere. Greg, great to have you here with us today. First and foremost, if you were to sum up what you did hear from Biden on the economic points that he was discussing last night, what grade would you give the president?

GREG VALLIERE: Well, he bragged with good reason. The economy is in pretty good shape. Unemployment is quite low. Inflation seems to be subsiding. The problem is, people aren't buying it. Most Americans still, I think, are scarred by what's happened with inflation. They don't give him a lot of credit. And when he does boast about it, he runs the risk of sounding out of touch, not in touch with the ordinary American consumer who still is worried about the economy.

BRIAN SOZZI: Greg, how worried do you think markets should be about the tone they heard last night from the president on the debt ceiling debate?

GREG VALLIERE: Good point. I think if anybody was hoping for any breakthrough on the debt ceiling, they didn't hear it last night. It's already becoming an acrimonious issue within the Republican Party and between the two parties. And I think that the scolding that both parties did is a sign of things to come. This convinced me that we're not going to get a breakthrough until summer, and both sides are bitterly divided on this issue. It's going to be a very long slog.

JULIE HYMAN: So this is interesting, Greg. So it sounds like you think all of this talk from the president about a tax on buybacks, for example, his rhetoric against corporations, billionaires, et cetera, is that sort of a sideshow to the real battle that is going to be happening over the debt ceiling?

GREG VALLIERE: I think it was a gift to the populace who wanted to have and issued a campaign on. And I agree with Rick Newman, who earlier said it's not going to happen. I mean, there's no chance at all that any significant tax increase could ever make it through this House. There's no chance that we're going to go after the oil companies. But it makes for good headlines. It pleases the populace. Maybe it gets them a little political support, but it simply will not happen.

JULIE HYMAN: So, Greg, just to follow up on the debt ceiling then, I mean, the cynic in me who has watched these battles happen before says, in the end, in the 11th hour, they're going to get it done anyway. So, like, what's the point of markets worrying? What's the point of all of this theater? Do you think ultimately that's what's going to happen?

GREG VALLIERE: I think there's enough radicals in the house, many of whom were heckling the president last night, enough radicals who are determined to get really dramatic spending reduction, maybe an across-the-board cap that might be in a final deal. But I think they are not going to relent any time soon. It's only going to take half a dozen perhaps to throw a monkey wrench into any progress. So this is different.

I think there's a better chance this could go right up to the last day or two. The markets are convinced that we'll get a deal. We probably will. But it might take something extraordinary from Jerome Powell. I think the Fed chairman would be aghast if he thought the US debt would default, and he might have to take extraordinary action.

JULIE HYMAN: Greg, I'm also curious, if you look at some of the latest poll numbers, the president's not polling great, right, especially if this is viewed as the informal kickoff to his next campaign. What could change that, if anything?

GREG VALLIERE: That's a really good question, and I'm sure his own people are asking that same question. What does poll well? Well, sticking up for Social Security and Medicare, that polls extremely well. So he played that card last night. I mean, the one thing he has to worry about and he can't do a thing about is his age. I mean, he's 80. Sometimes he looks a little frail. If he won a second term, he would be 86 leaving the White House. I mean, it's a stressful job. It's diminished presidents because of the pressure. So I think that's one thing that he can't change.

BRAD SMITH: Yeah, that's one thing we can-- none of us can change, unfortunately.

GREG VALLIERE: No, me either, yeah.

BRAD SMITH: Yeah, until we get a magic potion. Thanks so much, Greg Valliere, who is the AGF Investments chief US policy strategist. We appreciate the time this morning.

GREG VALLIERE: Great. See you soon.

BRAD SMITH: See you.