NEW YORK (Scrap Register): The investment climate faces a challenging environment due to U.S. monetary/fiscal policies, trade tensions and immigration issues, said Brown Brothers Harriman.
“All three of the major central banks met last week and confirmed that monetary policy would continue to diverge for at least another year,” BBH added.
The clarity of the trajectory of monetary policy reduces the impact of high-frequency economic data. There are three major disruptive forces that make for a challenging investment climate just the same: the U.S. policy mix, trade tensions, and immigration.
Analysts noted that the mix of tighter monetary policy and looser fiscal policy in the U.S. is “in extremis.” While the Federal Reserve says monetary policy is accommodative, the central bank has clearly signaled an intention to restrict policy.
Meanwhile, “the fiscal stimulus that is being provided in the form of tax cuts and spending cuts are larger than in 2008-2009,” BBH pointed out.
On another issue, the aggressive U.S. trade stance makes investors uneasy. The U.S. has gone ahead with plans to implement tariffs starting July 6 and China has responded with similar amounts and time.
The U.S. is in no mood for a compromise. Indeed, the confrontation with China is one area [that] draws support for the administration's critics.
Meanwhile, as the U.S. is embroiled in its divisive immigration crisis and turning asylum seekers away, Europe's refugee crisis threatens to topple two governments, the bank pointed out.