U.S. President Biden’s first months in office have been historic. He has issued more executive orders than his three predecessors combined, signed a $1.9 trillion stimulus package into law, and the proposed 2022 budget calls for $6 trillion in total spending. We are joined by Director of Global Macro, Jurrien Timmer, and VP of Digital Advocacy and Policy Communications, Greg Lowman, to discuss what this new economic environment means for investment portfolios going forward. Jurrien notes that the change in P/E has peaked, and the change in earnings has bottomed out. As a result, we are now transitioning from early-cycle to mid-cycle. He says structural inflation would be a big deal for the market because it would change the traditional 60/40 approach, noting that 60/40 only works in positive, low inflation environments. Greg discusses the possibility of debt ceiling costs, noting that political realities have hardened in a more partisan way since 2011. There is still a gap of approximately 6% between the unemployment rate and the full employment rate. Jurrien believes that policies will be kept loose until this gap is more or less closed.
Recorded on June 2, 2021.