Wilmington Trust is expecting the economy to pick up under President Trump, as long as his policies aren't “watered down by thrifty fiscal conservatives,” said Wilmington Trust CIO Tony Roth.
This time last year, Wilmington's forecast warned of tepid growth, possibly dissolving into a new recession. This year those negative concerns have been “forestalled,” Roth says in Wilmington Trust's annual economic outlook report.
The forecast and analysts' comments point to many contingencies. “We're entering the most interesting and intense period of our careers," Roth said in a recent press conference.
Describing the Trump administration as "eccentric," Roth said Wilmington has tried to filter out the static and focus on the real impact of the president's proposed policies.
“We're not looking for the most recent tweet, rather what is fundamental,” he said.
Three positive influences on growth this year could add 1 percent to economic activity, according to Wilmington's assessment of Trump proposals:
• A $550 billion infrastructure spending proposal, after a probable haircut, will likely survive with some stimulative fiscal policy change becoming law, Wilmington forecasts. In which case, it expects labor markets, wages and consumer spending will benefit.
• Tax reform would boost capital expenditures, they say, as would a lower corporate tax rate and the repatriation of U.S. corporations' offshore cash. A simpler tax system would hopefully reduce the burden on businesses, they say.
• Reduced regulation also is likely to unburden businesses, including the repeal of the Affordable Care Act and a stripping of restrictions imposed by the Dodd-Frank Act. Anticipation of the latter has already registered on Wall Street, judging by this year's Dow Jones index crashing through the long-sought 20,000 ceiling, according to Wilmington.
On the negative side, “Trump's near-term, pro-growth policies are deficit-financed. These problems will only loom larger,” according to the forecast. Resulting inflation could rise too quickly, triggering “short-term rate hikes and upending the long-standing recovery and slow global expansion.”