Everything Investors Need to Know about the Trump Effect in 78 Words
http://blogs.barrons.com/incomeinvesting/2017/01/06/everything-investors-need-to-know-about-the-trump-effect-in-78-words/?mod=BOL_hp_blog_ii
By Amey Stone
David Ader, the new chief macro strategist at Informa Financial Intelligence, has boiled down the impact of the incoming Trump administration on markets into a rather succinct 8 bullet points that add up to only 78 words.
Here they are:
1) lower payroll taxes will boost incomes, 2) lower corporate taxes will boost earnings, 3) spending on infrastructure will raise GDP, 4) but also the Federal deficit and long-term Treasury issuance, 5) those lower taxes make muni bonds less attractive, 6) better growth will boost the dollar and inflation, 7) thus nudging the Fed to hike a couple more times in 2017, and 8) encourage a steeper yield curve from all of the above which will benefit banks.
There is one more point he makes in his first monthly interest rate outlook that doesn’t fit so easily into succinct bullet points: That there will inevitably be a lot more uncertainty about Fed policy as fiscal policy plays a bigger role in the economy.
Ader writes:
One thing is a huge deal though a nuanced one. As fiscal policy shifts, the role of the Fed as the only entity impacting the economy is reduced. This does not mean the path of monetary policy is less important by any stretch of the imagination. Rather it implies the Fed will increasingly become more dependent on the impact of fiscal measures than it has been for several years. Thus, their own forecasts and related market expectations (which I repeat have been overly optimistic in this recovery) are subject to even greater uncertainties. These uncertainties create potential for greater volatility in expectations for monetary policy.
