Mid-Quarter Investment Outlook
The US economy continues to expand at a robust pace. Real GDP could grow an average rate of 3% over the next four quarters, turbocharged by pro-growth fiscal policies. Corporate earnings remain in a strong uptrend, led by the technology sector. The election of Donald Trump will have significant implications for the economy and financial markets over the next several years, including a faster rate of economic growth, much higher inflation, faster profit growth, and higher long-term interest rates.
I expect inflationary pressures to build over the next two years, strongly suggesting that the benign disinflation phase of the past two years is ending. A further easing in monetary policy is not needed but the Federal Reserve will likely cut rates nonetheless. The breakout in bond yields will ultimately infect the equity market, which is already in overvalued territory. Investors should expect an eventual rotation in equity market leadership over the next year, as cyclical stocks and value managers outperform the technology sector... READ MORE
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