February 28, 2017, 4:30pm EST Invest Alongside Billionaires For $297/Qtr
Markets are quiet as we head into President Trump’s address to Congress tonight. As we’ve discussed over the past week or so, the markets seem to have run the course on the outlook of fiscal stimulus and regulatory reform within an environment of a gradual rise in interest rates.
That “expectation” backdrop seems to be pretty well priced in. Now, it’s a matter of detail and timing, and that puts the new President squarely in focus for tonight.
We’ve already heard from his Treasury Secretary last week that tax reform wouldn’t be coming until August-ish. And he said we shouldn’t expect that big growth bump from Trumponomics until 2018. That’s been the first real downward management of the expectations that have been set over the past three months.
What hasn’t been discussed much is the big infrastructure spend, which is really at the core of the pro-growth policies of the Trump administration. For years, the Fed has been begging Congress for help in stabilizing the economy and stimulating growth in it — from the FISCAL side.
Given the wounds of the debt crisis, it was politically unpalatable for Congress. They ignored the calls. And as a result, just six months ago we (and the rest of the world) were dangerously close to slipping back into crisis. Only this time, the central banks would not have had the ammunition to fight it.
So now we have Congress with the will and position to act. It’s a matter of detailing a plan and getting it moving. Of the many positive things that could come from tonight’s speech by President Trump, details and timeline on fiscal stimulus would be the biggest and most meaningful.
The bickering about deficits and debt will continue, but a big stimulus package will happen — it has to happen. A government spending led growth pop is, at this stage, the only chance we have of returning to a sustainable path of growth and ultimately reducing the debt load down the line, which now is about 100% of GDP. A move back to 80% of GDP would make the U.S. debt load, relative to the rest of the world, a non-issue.
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