This is supremely difficult to answer. Anything can happen, and sometimes does. The Trump administration seems to be more focused on domestic scandals than anything else and is flying by the seat of its pants in most other matters. The President’s disruptive antics could cause an economic contraction, by accident. Nonetheless, the tax cut and the federal spending hike should keep the late-stage business cycle from slowing too quickly. Core inflation should continue to rise gradually, as labour supply tightens, so we still expect the Federal Reserve Bank to hike interest rates three times in 2018 and two in 2018.
Risk aversion is overdone
Concerns over Syria, protectionism and repricing of credit risk have pushed Asian forex lower, especially in the indebted economies. The sell-off provide opportunities to buy the tiger cubs – India, Indonesia and Philippines – with solid structural and cyclical upturns expected. The region’s growth engine is revving strongly. China’s GDP rose 6.8% annually in Q1 2018, beating the market expectations. China’s retail sales increased 10.1% month-on-month in February, up from 9.7% in January
By Peter Rosenstreich
