The 2016 US elections, Q&A with Blue Quadrant Capital ManagementDonald Trump has won the presidency of the United States and financial markets in general have not reacted well to this development. What are the implications of this surprise event for investors and specifically, global investors?
US GDP 2Q16
Cyclical Factors weigh on US GDP but the foundation is laid for a powerful acceleration going forward
US GDP grew at a disappointing 1.2% (q/q, annualised) in the second quarter of 2016, well below consensus forecasts of 2.6% (Reuters). The main negative contributors, as has been the case in recent quarters, were a continuing reduction in inventory levels and weak non-residential investment spending. The change in inventory levels during the second quarter, subtracted 1.2% from overall GDP, while non-residential fixed investment subtracted a further 0.3%.
SynopsisCurrent consensus expects continued disinflation in the global economy. US and global labour market dynamics do, however, point to a threat of the return of sustained wage inflation over the next 5 to 10 years. A heightened risk to medium-term inflation outlook is caused by:
- Fundamental dynamics such as lack of infrastructure investment in major developed economies.
- The end of ‘Moore’s’ law and geopolitical-induced disruption to global energy supplies.Memories of the 2008 financial crisis create the risk that policymakers will be slow to react and respond to a return to elevated global inflation.
SynopsisUS current account deficit will narrow and possibly move to surplus as US energy production and net imports decrease. Accelerating US economic growth will lead to gradual rate normalization. Coupled with less global dollar liquidity and a smaller US current account deficit, the fundamental underpin for the global ‘carry’ yield trade will become progressively less favourable. These dynamics will attract capital flows back to the US, supporting sustained US Dollar bull market.
SynopsisRecent data covering the US housing sector has shown a mixed picture, with some indicating renewed weakness in new home sales and existing home sales. In this insight, we examine what is driving some of this renewed softness and detail our longer-term outlook for this key sector of the US economy.