Giles Moec, chief economist at Axa Investment Managers, expects the US will not raise rates further but that the Federal Reserve's rhetoric will continue to highlight the threat from inflation.
Such rhetoric may itself act as a dampener on inflation as retrains economic activity from among those consumers and companies who are most concerned about the potential impact of more interest rate rises on their prospects.
But additionally, such rhetoric now may make it more difficult to cut rates anytime soon.
Ian Brady, chief investment officer at WH Ireland, is another who believes that while rates may have peaked in the US, a combination of several economic indicators continue to point to inflation persisting, which he believes will mean rates will not be cut.
American beauties
Will McIntosh Whyte is a multi-asset investor at Rathbones and he recently toured several secondary US cities to gauge the condition of the economy.
He says one of the things he noticed was the rapid pace of adoption of technology, even in rather “boring” parts of the economy and away from the major cities.
His view is this will boost productivity long-term.
He added that some of the stimulus policies, particularly focused around green energy, have also helped to boost the economies of secondary cities, and for this reason he quite optimistic on the outlook for the US, despite the looming impact of higher rates.
McIntosh-Whyte says the fact the growth is coming in many areas of the country which were previously struggling economically is a major reason to be positive on the US economic outlook.
Miller says much of the growth described above has been the result of substantial investment programmes from the US government.
He regards those programmes as a positive, but says: “they led to the highly unusual situation whereby unemployment remains very low, but the fiscal deficit is rising. Now normally, that doesn’t happen, the deficit should be falling when unemployment is so low [because the amount the government collects in tax should be rising, while social security costs are falling], the fact that hasn’t happened is a key reason why the economy has remained resilient. But I still anticipate that higher debt costs will have an impact.”
Investment implications
Rupert Thompson, chief economist at Kingswood, said he favours Asian and emerging market equities over US equities.
He says this is because he doesn’t feel the Federal Reserve will be able to cut interest rates soon, while central banks in emerging economies can, and so should receive a boost to growth.
