TSG Quarterly Commentaries






New Administration

Expect the Trump Administration to support and introduce policies that are viewed by business leaders and consumers as more pro-growth than those that existed under the Obama Administration.  These policies are likely to boost business, consumer, and investor confidence.  However, while the desire of the new president is to increase infrastructure spending, relax the regulatory climate and change the tax code, these efforts will take time to implement and are likely to be scaled back from initial proposals.  Additionally, the consequences of new programs could lead to larger deficits and a rapid rise in inflation.

2.5+% Economic Growth

U. S. economic growth continues at a moderate pace, but is showing signs of gaining momentum.  Business confidence has strengthened, small business optimism reached its highest reading since 2004, and hiring intentions are rising.  Corporate America remains cautious on capital investment, but new tax policies could drive increased spending on domestic manufacturing.  However, until policies are in place, there is not likely to be a significant acceleration in capital spending.  Construction spending is exhibiting steady growth.  Consumer confidence and spending is being supported by wage gains and job growth.  In a stable growth environment, equity prices should continue to work higher.


Job growth is leveling off but is expected to produce steady gains of more than 100,000 per month.  Average hourly earnings continue on an upward trajectory.  Both provide a positive foundation for consumer spending.  Stable food and energy prices should mitigate the increased costs of healthcare.  

Household Formation

Millennial job growth is increasing at a greater pace than overall employment.  The improved job outlook and family formation is driving millennials to greater levels of home rental and purchase, which should be favorable for the residential construction and remodel activity.  Housing starts and existing home sales remain below peak levels, impacted by limited inventory, labor shortages, rising prices, and still stringent lending standards.  However, the longer term outlook is favorable given the current trends, and should be beneficial to home improvement and building supply companies.



Federal Reserve Policy

The Federal Open Market Committee raised the Fed Funds rate in December.  Given the present employment and inflation outlook, and the improving economic growth environment, the Fed appears poised to implement another two to three increases in 2017.  Policy expectations have been well communicated to financial markets which should ease the level of uncertainty.

China Growth

China’s economic growth appears to have stabilized in the 6-7% per annum range, benefiting from monetary and fiscal stimulus.  The current environment should provide a measure of stability to global financial markets.  Chinese authorities are quite concerned about capital outflows and have been raising restrictions to stem the capital leaving the country.  Political risk has also become elevated as reports of infighting among the upper levels of government have increased.




The dollar has been strengthening since the election, reaching levels not seen in over 14 years. The prospect of the pro-growth Trump administration agenda and the increase in Fed Funds rate has served to push the dollar higher.  A stronger dollar will cloud the growth and earnings outlook for multinational companies.

Trade Uncertainty

President-elect Trump has been vocal in his desire to bring manufacturing jobs back to the U.S. and using tariffs, trade agreement renegotiations, and other tax methods to make it more beneficial for companies to produce and source goods domestically.  Any policy changes could raise barriers to global trade and impact growth prospects.

European Union Stability

Cracks in the European Union have begun to emerge since the vote by the UK to exit. Uncertainty remains as to how the process will unfold.  The growing populist sentiment within countries amid concerns over migration and terrorism have the potential to further destabilize the European Union as elections are scheduled in Germany, France, and the Netherlands that could change the seat of power within these countries and lower support for a common union, strangling the emerging recovery.



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