Investment outlook 2019: US fiscal sugar rush will fade - J.P. Morgan Asset Management
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Investment outlook 2019: US fiscal sugar rush will fade

Contributor Karen Ward
US outperformance is unlikely to persist through 2019 as the sugar rush of the fiscal stimulus wanes

We don’t believe significant US economic outperformance will persist through the course of 2019. The fiscal stimulus that provided an intense sugar rush in 2018 is expected to fade in the coming quarters, and overall US GDP growth is expected to moderate to less than 2% by the end of 2019 (see below).

The sugar rush of fiscal stimulus will fade in 2019

Contribution of fiscal spending to US real GDP growth
% points contribution to real GDP (quarter on quarter, seasonally adjusted annualised rate)



Source: Congressional Budget Office, J.P. Morgan Asset Management Multi-Asset Solutions, J.P. Morgan Asset Management. J.P.Morgan Asset Management Multi- Asset Solutions estimates as of 30 November 2018.

The tax cuts could have generated more lasting effects through increased business investment. But, in the face of geopolitical uncertainty, firms are now deferring investment. The effect has been most stark in Europe and Asia, but there is increasing evidence that capital expenditure intentions are fading within the US itself (see below). This is particularly disappointing because what the global economy desperately needs is stronger investment to revive potential growth, lift productivity and real wages, and in turn ease many of the political challenges.

The trade war is denting corporate enthusiasm for investment

US and Europe future capital expenditure intentions
Index level, capex intentions over the next 6 months



Source: Dallas Fed, IFO, Kansas City Fed, New York Fed, Philadelphia Fed, Richmond Fed, Thomson Reuters Datastream, J.P. Morgan Asset Management. US capex intentions is an average index level of the five aforementioned fed districts equally weighted, displayed using a three-month moving average. Data as of 30 November 2018.

One potential solace for markets may come from the Fed. The recent decline in the oil price, alongside the strength of the US dollar in 2018, is likely to mean headline inflation remains close to the 2% target. We expect the Fed funds rate to edge closer to 3% by mid-year, but believe the Fed will demonstrate that it is considerably more hesitant and data dependent in the coming months.

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Download the full 2019 outlook >  

Key themes for 2019


Important information

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