Once fears over a possible trade war pass—and Doll predicts there will be a trade deal signed between the United States pass; that both nations are eager to complete a deal, “any deal”—it will be easier for businesses to invest more. And tax cuts along with improved competiveness will ensure the economy continues to expand, he says.
But there will also be some factors, he adds, that will slow the market. These include a flattening yield curve, rising credit spreads, trade war uncertainty, market structure/liquidity concerns, end of cycle fears and a growing federal deficit.
Of the latter, Doll warns that the deficit will hit a trillion dollars for the first time during an expanding economy. This is “a level unprecedented absent a recession.”
Could record government red ink hurt the nation?
Doll says in the short-term no. However, he said, the problem of expanding deficits does potentially pose a long-term threat. In some future recession, a very deep one which Doll doesn’t expect the next one to be, there could be danger unless the government does something about entitlement overspending.
But that won’t happen in the short term, Doll argues. That’s because today there is no political will to do something because it would inevitably mean less spending.