Economy Pushes on as Trump Approaches First 100 Days

Overview:

• The US economy may lead developed nations with over 2% growth in gross domestic product (GDP) in 2017. The benefits of Donald Trump’s proposed policies of lower taxes, higher infrastructure spending and less regulation should be realized more in 2018 than in 2017. However, the impact of his trade policies may offset some of the potential benefits of his fiscal policy.
• Solid employment should continue to support consumption and the housing market. Stronger corporate profits, as well as government spending, may also contribute to growth in 2018 and beyond. Increasing global Purchasing Manager Indices (PMIs) suggest that growth in global economies is also increasing.
• We believe inflation has essentially reached the Federal Reserve’s (Fed’s) targets, and that the Federal Open Market Committee (FOMC) risks falling behind the curve, with the economy near full capacity and little labor market slack.
• The dollar may be largely range-bound. While it may be supported by wide yield differentials, continued divergence in central bank policies and a positive economic outlook for the US, countervailing forces, including Trump’s preference for a lower dollar, combined with the three openings on the FOMC, the potential for more expensive trade and the improving global economy, may put a brake on dollar appreciation.
• The market has priced in a good deal of the Trump reform platform of lower taxes, less regulation and higher infrastructure spending, which may lead to near-term disappointment if follow-through does not happen this year.

Written by Pioneer Investments’ Head of Investment management US, Ken Taubes

For the full report click here; 30081-00-0317-Economy-Pushes-On-as-Trump-Approaches-First-100-Days-final