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While we remain constructive on global equity markets, with the largest looming productivity boom in human history and a US pro-growth policy that could leave the world little room but to jump on the same growth bandwagon, a smooth exponential or linear path is unlikely.
We expect noise around the US budget reconciliation process in April, when reality will set in that tariffs will have to fund the fiscal expansion in the US or that alternatively campaign promises will have to be pared back. There is some challenging math around the budget reconciliation, whether it happens in one bill or in multiple bills.
Since the Republican majority in the House is small, the most likely outcome may be pared-down campaign promises of fiscal stimulus. From a timing perspective, Trump seems to front-load the peace negotiations in Europe over tariff negotiations, likely to secure China’s support for a peace deal. So short-term positive news on this front may be quickly followed by new tariff proposals.
Meanwhile, a strong US economy may result in another hot CPI print over the coming months, limiting the amount of rate cutting by the Fed.
For much more, see the Global equity strategy report: , 19 February, 2025.
