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President Trump at a November rally in Chattanooga, Tennessee (Jonathan Ernst / Reuters)
A noticeable change has occurred on Wall Street and among many economists and business leaders in recent weeks: fears of an impending recession have faded and have been replaced by cautious optimism, particularly around 2020 , a trend that bodes well for President Trump while he seeks re-election. .
The International Monetary Fund is a good example. Last week, she made the headlines by lowering her global growth forecast. the lowest pace since the financial crisis, but its outlook is not as bleak as it seems. The IMF also predicted a rebound later this year and slightly stronger growth next year for the global economy, which should be positive for the United States.
"After the modest start, growth is expected to accelerate in the second half of 2019," wrote IMF chief economist Gita Gopinath in a blog post.
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The IMF is not the only one to be optimistic. The US stock market has had the best first quarter since 1998 and is now poised to hit a record. According to Goldman Sachs, the probability of a recession next year has been cut in half to 10%.
There is a plausible story to tell which explains why this optimism is rooted: a trade agreement between the two countries seems likely, the Chinese economy seems to be stabilizing and the Federal Reserve (along with other banks central authorities) has shown that it will do everything in its power. takes to continue this expansion.
Many of the major fears that drove the stock market down at the end of last year and caused concern over a US and global recession by 2020 have subsided. Instead of a recession, some are talking about a "positive surprise" in which the US economy could grow faster than expected, especially if businesses start spending more as Trump's trade war gets colder and the Fed does not raise interest rates.
"The economy could grow by more than 2% this year. I think this is going to be the big surprise, "said Scott Minerd, Global Investment Director at Guggenheim Investments.
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Almost no independent expert says that the economy will grow above 3% in 2019 and 2020, as the White House predicts. But most forecasters are now in the range of 2% to 2.5% for 2019 and around 2% for 2020, which is probably enough to keep unemployment low and raise wages at a steady pace.
The economic situation in the spring of 2020 should play an important role in Trump's chances of re-election, according to election experts such as Larry Sabato of the University of Virginia's Center for Politics. The best guess at the moment is that the economy from early to mid-2020 will not produce the "huge" growth that Trump likes to brag about, but there's a good chance she's doing pretty well to give it an advantage against his Democratic opponent.
"If the unemployment rate is still between 3.5 and 4% and that gasoline costs $ 2.75 and the stock market is still close to a record high, then the economy is probably the responsibility of the president or at least not a headwind, "said Mark Zandi, chief economist at Moody's Analytics. "If you incorporate this scenario into our electoral model, Trump wins or is close."
It is notoriously difficult to predict the direction of the US economy, perhaps even more so now, as the country is showing clear signs of slowing down from the strong growth recorded last summer. And we do not know if the country is experiencing a slight deceleration or something deeper.
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In contrast, US companies continue to recruit at a steady pace and wages are rising, including for the least skilled, which should reassure Americans and allow them to continue spending. The housing market is also showing signs of recovery, indicating that people still have confidence in the economy and their personal finances.
China, a nation often rejected by Trump, is also stimulating the global and US economies by stimulating its own. China, the world's second-largest economy, said Wednesday that growth was 6.4 percent in the first quarter, slightly above expectations and a sign of China's stabilization despite the trade war.
But all is not well. The US manufacturing sector has experienced a significant slowdown this year and business and consumer confidence, although still high by historical standards, is down from what it was a few months ago . Europe also continues to appear weak and has to settle Britain's exit from the European Union in the fall. A "no deal" situation with Brexit would be "the first time in about 45 years that we had a significant negative supply shock for an advanced economy," said Bank of England Governor Mark Carney .
Diane Swonk, chief economist at Grant Thornton, said, "We do not know how to time recessions, but the list of factors that could trigger one is getting longer. There are still a lot of antipersonnel mines.
Trump has repeatedly accused the Fed, particularly President Jerome H. Powell, of driving down the economy by raising interest rates too quickly last year. (The Fed has raised interest rates by one percentage point.) But economists, investors, and business leaders no longer see it as a concern now that Powell said the central bank was "Pending" and unlikely to increase rates this year.
With the Fed on the sidelines, Trump should play an important role, whether because of the economy and the markets that beat expectations or disappoint, depending on what is happening with trade and the federal budget. As far as trade is concerned, he has dubbed himself a "man of tariffs", raising fears that his trade war may not end. Many are wondering: after the conclusion of an agreement with China, will Trump set fire to Europe or Japan?
Europeans "are barely taking our agricultural products and yet, they can sell Mercedes-Benz and everything they want in our country," Trump said on Monday, underscoring his constant desire to reduce the US trade deficit with the company. 39; Germany. "It's not fair."
Trump has not yet removed the rates that it has put in place. Even steel and aluminum tariffs on Canada and Mexico, which, he said, were a bargaining tactic, did not change after the revision of the T & C. North American Free Trade Agreement, which became the Agreement between the United States, Mexico and Canada.
"All the optimism about the economy means that the trade dispute between the US and China is being wrecked and that Mr Trump is not starting to impose car rights on the EU. . and Asia, "said Joseph Brusuelas, chief economist of the RSM accounting firm.
Trump's best chance to stimulate the economy might be to reach a budget deal with Speaker of the House of Representatives Nancy Pelosi (D-Calif.) In September. The federal budget is supposed to be reduced for the next fiscal year through a process called sequestration, but Pelosi and Trump could easily keep funding levels at the same level as this exercise, or even go a bit higher.
"The White House will have to come to the table with President Pelosi," said Brusuelas. "The only tool you can use to revive the economy before the elections is government spending, especially if the Fed stays on hold."
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