U.S. Economy: Collision of Disruptive Policies and Reality

Several weeks into the new administration, a new sense of optimism about future economic growth pushed the equity market into a new high. The Fed has hinted strongly on plans to hike the interest rate as often as necessary in 2017 to thwart overheating of the economy. The question is whether to expect inflation or reflation in light of the glut in the energy market as well as the considerable time that it will take for infrastructure spending to translate in higher employment and income. The market remains uncertain as to how to process risks and rewards associated with the much-anticipated trade restrictions on real output, employment, and inflation. It is much easier to remove or reduce regulations on producers or implement tax cuts, while identifying and funding shovel-ready infrastructure projects with a significant impact on demand for workers and material is substantially time-consuming. The proposed immigration policies will adversely affect many sectors of the economy, including construction, food services, agriculture, and retail.