Pos­i­tive out­look for US in 2017

Kuwait Times - - BUSINESS - By Haider Taw­fik

It seems that Novem­ber 2016, was a turn­ing point for the US, po­lit­i­cally and eco­nom­i­cally. The fi­nan­cial mar­ket liked the re­sult of the US elec­tion even though they were ner­vous be­fore the elec­tion. At present, the out­look for the US econ­omy ap­pears much brighter than a few months ago. This is in ab­so­lute and rel­e­vant to some other Western and emerg­ing economies.

Thanks to the change in the US ad­min­is­tra­tion led by the newly-elected pres­i­dent. The whole de­vel­op­ments were very sur­prise to most of us and very few of us pre­dicted the elec­tion out­come and the re­ac­tion of the fi­nan­cial mar­kets. Could this be the start of the re­ver­sal of low in­ter­est rates, end of Quan­ti­ta­tive Eas­ing, low in­fla­tion, low bond yields etc. The early signs are telling us that the new nor­mal that started back in 2008 ha some to an end. This could only hap­pen if politi­cians de­liver what they promised.

The strong rally in global stocks and, dol­lar and the big rise in yields on govern­ment bonds, show that in­vestors have ac­cepted the like­li­hood of higher growth and higher in­fla­tion in the com­ing months. How­ever, this may not ap­ply to other economies. As the risk of high in­fla­tion and weak cur­rency could threaten Eu­ro­zone and emerg­ing economies. At present US econ­omy is grow­ing mod­er­ately with no risk of in­fla­tion. In­vestors have al­ready de­cided that their money is on the US econ­omy.

Frus­trated peo­ple in the western world had enough of slow eco­nomic growth and high un­em­ploy­ment and have taken their anger out on the politi­cians. This has hap­pened in Canada, UK, the Eu­ro­zone now in the US. The global mar­ket ur­gently needs new pro eco­nomic growth poli­cies and prac­ti­cal mea­sures. Donald Trump has promised his vot­ers that he will do ex­actly what the econ­omy ur­gently needs.

Clever politi­cians have been re­act­ing to peo­ple’s de­mands for eco­nomic growth and em­ploy­ment, and they are re­spond­ing by say­ing that they are lis­ten­ing and they will de­liver peo­ple’s de­mands. In­vestors and the fi­nan­cial mar­ket have al­ready shifted gear and they will not re­verse as they will al­low the politi­cians, time and space to carry out on what they have promised. The big move in stocks, the dol­lar bond yields and in­fla­tion out­look is not easy to re­verse as bil­lions of dol­lars have al­ready shifted into new in­vest­ment strate­gies. The mes­sage that was sent to US politi­cians back in Novem­ber are likely to be re­peated else­where around the world.

The rest of the world should ben­e­fit from Donald Trump’s pres­i­dency and par­tic­u­larly the emerg­ing mar­kets. That is be­cause he is more fo­cused on eco­nomic growth in the US. A dou­bling of US eco­nomic growth should ben­e­fit the rest of the world tremen­dously. — @rasameel

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