US stocks have been buoyant amid Donald Trump’s promises of fiscal stimulus, lower taxes and lighter regulation. Treasury Secretary Steven Mnuchin has raised the prospect of growth accelerating to more than 3% and both he and Trump have heralded progress on tax reform. But whatever the administration says, “there is ample reason to doubt how much of this will materialise”, says the FT.
The economy hasn’t consistently grown by more than 3% since the 1990s, when the workforce was expanding much faster and productivity was on the rise. Productivity has been lacklustre in recent years, and a big jump seems unlikely. The administration has been trying to temper expectations about its tax and infrastructure plans, says John Authers on FT.com.
According to Mark Lapolla of Sixth Man Research, the government has been signalling that corporate tax cuts may not be as deep as expected, and it could be 2018 before the economy gets a fillip from any policy changes, while the infrastructure spending boost is unlikely to be tackled by Congress before then either. The optimistic growth forecasts investors are counting on, concludes Authers, “look suspect”.