Tuesday, December 6, 2016

The UCLA Forecast

The UCLA Anderson Forecast took place at our favorite UCLA Grand Hotel. A news release summarized the highlights which is essentially that the Forecast had to be revised because it was assumed pre-Election Day that Clinton would win.* None of the speakers could say for sure exactly what Trump would do for all the obvious reasons. But it was assumed that one thing likely to be passed by Congress was a tax cut, i.e., a fiscal stimulus. Such stimulus tends to bump up real economic activity but with the economy already down to 4.6% unemployment, the added stimulus is likely to have some inflationary effect and trigger the Fed - with new Trump-nominated leadership - to push up interest rates. One paradoxical result is more imports as consumption rises - despite the Trump emphasis on improving the trade balance. The local LA economy tends to benefit in its logistics sector (ports and related) from more trade. If a trade war is ignited, of course, there would be less trade. California - which still has a significant (although reduced) defense sector - could benefit from more military spending, if that occurs. There was some skepticism about a big infrastructure program but whatever there is, California might get some benefit (unless the powers-that-be in DC decide to punish California for its immigration stance). There was skepticism about a mass immigrant deportation effort. But who knows, really?

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