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Macro & Geopolitical

Five Likely Winners & Losers for the Winter Ahead

2018-12-17 00:00:00 - 5 min read

From Donald Trump to Nancy Pelosi and more, Christopher Smart, Head of Macroeconomic & Geopolitical Research, shares his thoughts on who and what to watch in the months ahead.

Predictions are a fool’s game, but the reasoning behind them can help us identify the key forces that will drive investment returns. To better understand how 2019 is shaping up, we are keeping a sharp eye on 10 crucial trajectories. Keep score with us over the next three months as we track this winter’s likely winners and losers.

WINNERS:

  1. Donald Trump: The Democrats own the House, the Mueller investigation looms and financial markets are tumbling, but the president may just pull a few rabbits out of his hat. A temporary deal with China depends largely on what terms he is willing to accept. Beijing apparently stands ready to buy more U.S. soybeans, enhance protections of intellectual property and, shockingly, adjust its plans to bolster technological progress in key industries through its signature “Made in China 2025” program. These steps will hardly solve the deep systematic differences between the world’s two largest economies (lax enforcement will continue to fuel complaints), but they should be enough to allow the president to declare an interim victory. If the looming December government shutdown doesn’t last too long, he may even disarm the new Congressional leadership with a deal on infrastructure spending that helps boost wavering confidence in domestic economic growth.
  2. U.S. stocks: No, they are not historically cheap and no, we have yet to see what market veterans would call real gut-wrenching capitulation, but earnings yields are starting to look more attractive when compared to falling Treasury yields. The tech sector may not return to its recent highs anytime soon, but there is a case to be made for equities to potentially post gains in the months ahead.