Policy gets a lot of real estate in our just-released Midyear Outlook 2019: FUNDAMENTAL: How to Focus on What Really Matters in the Markets. It’s no coincidence that policy is chapter one because it’s such a big part of the economic and market outlook for the second half of the year.
“We believe fiscal stimulus from the Tax Cuts and Jobs Act of 2017, along with decreased regulation and increased government spending, will continue to support the U.S. economy in 2019, and that the potential impact is both larger and more durable than consensus expectations,” noted LPL Chief Market Strategist John Lynch. “Unfortunately, whether the benefits of these fiscal measures fully materialize remains an open question due to trade uncertainty.”
As our LPL Chart of the Day, “Contribution of Fiscal Stimulus to Output”, shows, fiscal policy’s contribution to real gross domestic product (GDP) growth should be about 2.2% in 2019, higher than the 1.3% contribution in 2018.
Uncertainty around global trade may be discouraging productivity-enhancing capital investment. We believe self-interest will bring the United States and China back to the negotiating table, but until we see progress, trade tensions remain the primary risk to our forecasts. We hope some progress will be made this weekend when President Trump and President Xi are expected to talk at the G20 summit in Japan. Tariff decisions will be a key determinant of whether the U.S. economy can meet our lowered 2019 GDP growth forecast of 2.25 to 2.5 percent.
Policy is about more than fiscal measures and trade, however. With inflation low, global growth slowing, and trade risks still present, monetary policy may be too tight for the current environment.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
This Research material was prepared by LPL Financial, LLC.
Please see the Midyear Outlook 2019: FUNDAMENTAL: How to Focus on What Really Matters in the Markets for additional description and disclosure.
Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).
Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL is not an affiliate of and makes no representation with respect to such entity.
If your advisor is located at a bank or credit union, please note that the bank/credit union is not registered as a broker-dealer or investment advisor. Registered representatives of LPL may also be employees of the bank/credit union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, the bank/credit union. Securities and insurance offered through LPL or its affiliates are:
|Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by Any Government Agency | Not a Bank/Credit Union Deposit|
For Public Use | Tracking # 1-867075 (Exp. 06/20)