If one heeds the opinion of Jurrien Timmer of Fidelity, the Trump administration's pledged aims of tax cuts, infrastructure spending and deregulation will propel the economy of the United States into newer heights. This, of course, depends on whether such measures will be passed at all. However, a stop in such activities will not automatically translate into a downward spiral for the markets. Timmer is a director of Fidelity Investments and is entrusted with global macro strategy at his company.
The US and the world
Timmer, in his interview to a prominent media house, said that the commercial activities across the world have a certain synchronized momentum. He continued on to say that people lose their sight on the objective as every person is focused on headlines. He added that there is an acceleration of the global economy. This worldwide economic acceleration is good news for markets and also for the earnings. He said that the markets have met President Trump halfway. The former has priced in the proposed agenda of the latter. He pointed out that if one notices the small caps and contrasts them with large caps, they went from minus 12 percent spread during the summer of 2016 to an extra 18 percent spread during December. This is due to, as per Timmer, both small and domestic firms benefited from deregulation and tax cuts.
Timmer also warns that the global momentum, albeit unrelated, must be taken into account. He warned that American markets could be overshadowed by “global synchronized expansion” in case Trump's wishes are blocked by Congress. He said that the Standard & Poor is now near Russell, and international stocks are now near to US stocks. He said that the loss in market momentum means global stocks will not compete with the American stocks.
Many other traders, however, were not so bullish on the activities of the Trump administration. One of them is Steven Ricchuito, the chief economist of the United States branch of Mizuho Securities. If one goes by his opinion, if this market loses its momentum, then there will be a loss of momentum in global stocks as well. He pointed out that there is a good possibility of the global economy getting stalled. He added that the macroeconomic environment in the domestic sector must get moving. The problem is that nobody has seen any sign of that happening yet.