Positive outlook for US in 2017
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