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Will Trump’s Fiscal Policy Be A “Game Changer”?

From Deutsche’s Alan Ruskin (emphasis mine):

For those who were sitting on trading floor, it felt like Brexit all over again. A market led by skewed positioning, and bits of pieces of misleading early polling/turnout data, only to be taught a raw lesson about the deep divide between urban and rural and particularly those left behind by the frenzied changes imparted by globalization. That may be reading too much into a two horse race with such distinct personalities, but Trump’s ability to pick-up the rust belt to clinch his Presidential bid, had its parallels in the Brexiteers successes in winning the UK’s rusted industrial north. While the political divide is extraordinary, it is here where the parallels with UK diverge dramatically. Far from being stymied by some convoluted negotiation process, with no end in sight, the US is about to emerge from gridlock. The question is not whether Trump can get a large fiscal stimulus through, but whether a Republican Congress can ‘right size’ the package so as to not undermine fiscal sustainability too much. What would ‘right size’ look like? Something akin to say a 1% of GDP per annum, and, a 2 or 3% of GDP cumulative stimulus, would be a macro game changer. If it comes with supply side measures inclusive of a large corporate tax cut, the market will likely set aside their considerable concerns about debt sustainability and give the policies the benefit of the doubt – albeit with the experience of Reagan’s second term, that when the fiscal stimulus runs dry, so does the above trend growth. If this is the predominant view of Trump’s economic platform then the market looks to be grossly mispricing Fed policy, with its current 46% probability of a December rate hike, and as important only 2 in 3 chance of another 25bp hike in 2017.

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