Donald Trump’s proposed policies are likely to lead the US into a period of strong economic growth, according to global investment bank Pioneer Investments.
The US economy may lead developed nations with over 2 percent growth in gross domestic product in 2017, Pioneer Investments’ Head of Investment management Ken Taubes said in a report released on Thursday.
He added that Donald Trump’s proposed policies of lower taxes, higher infrastructure spending and less regulation are likely to have a positive impact, but may take effect more in 2018 than in 2017. However, Taubes continued, the impact of his trade policies may offset some of the potential benefits of his fiscal policy.
Looking at the wider economy, the investment bank believes inflation has essentially reached the Federal Reserve’s targets. It warned that “the Federal Open Market Committee (FOMC) risks falling behind the curve, with the economy near full capacity and little labor market slack.”
However, in the wake of strong unemployment figures released on Thursday, solid employment should continue to support consumption and the housing market.
“Stronger corporate profits, as well as government spending, may also contribute to growth in 2018 and beyond”, Taubes said.
Examining Trump’s policies in more detail, Pioneer believe Trump’s pro-growth policies of tax reform, infrastructure spending and lower regulation will all contribute to growth, but that the most important policy to watch out for will be corporate and individual tax reform.
Trump plans to cut personal tax rates to 12 percent, 25 percent and 33 percent, limit deductions, reduce the capital gains and dividend tax rates and eliminate the estate tax and alternative minimum tax. If Trump’s plans succeed, the corporate tax rate would be cut from 35 percent to 15 percent – a significant difference.