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What Unites Boris Johnson and Donald Trump? Spending a Lot More Money

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What Unites Boris Johnson and Donald Trump? Spending a Lot More Money

Author: Greg Valliere

December 16, 2019

IT WASN’T JUST ABOUT JEREMY CORBYN: Some analysts have attributed Boris Johnson’s stunning landslide to the unpopularity of his opponent, but it’s more than that — the U.K. election was a repudiation of traditional thinking about government, similar to what’s unfolding in the U.S., where Donald Trump is now the favorite to win re-election.

THE RISE OF THESE TWO POPULIST, NATIONALISTIC FIGURES has several common themes: a disdain for government bureaucrats (Johnson will fire many of them in coming weeks); a deep aversion to traditional trade policies; and — most startlingly — a rejection of the old conservative mantra about fiscal restraint. Spending is back, big time.

JOHNSON HAS PLEDGED TO SPEND BILLIONS on infrastructure, especially in the north, where he isn’t popular. He also will unveil new tax cuts. Likewise, Trump will preside over a deficit in this fiscal year that will exceed $1 trillion, boosted by higher spending on defense, domestic programs, you name it. And he will campaign next year for more tax cuts and infrastructure spending.

SPENDING IS POPULAR: What a difference in a decade — the overwhelming sentiment ten years ago within both U.S.parties and most of Europe was to reduce budget deficits; the politicians disagreed over how: through higher taxes or deep spending cuts? But the public has rebelled against austerity, and Trump has led the way.

THE PUBLIC WAS WARNED that surging deficits would lead to higher interest rates, but it didn’t happen. The public was warned that surging deficits would lead to higher inflation, but that didn’t happen, either. Trump understands the public mood better than any politician in America, and he believes that spending will fuel stronger growth — at least in the short-run.

AT SOME POINT IN THE NEXT DECADE, as annual U.S. deficits soar well past $1 trillion, there will be a crisis; debt servicing costs will swallow up virtually all discretionary funds as U.S. debt surges to 100% of GDP or higher. But that’s another problem for another day; for now the politicians see a path to re-election and solid growth.

AND IF INFLATION SHOULD FINALLY RETURN, so much the better. Despite his rocky relations with the Federal Reserve, Trump and Chairman Jerome Powell would both welcome higher inflation; be careful what you wish for. We don’t think higher inflation is imminent, but aggressive fiscal and monetary stimulus should produce decent economic growth. This much seems certain: austerity is out on both sides of the Atlantic.


The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

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©2021 AGF Management Limited. All rights reserved.

Written by

Greg Valliere

Greg Valliere

Chief U.S. Policy Strategist

AGF Investments

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