US markets have reacted positively to Donald Trump’s re-election as US President, much as they did in 2016. Once again President-elect Trump ran his campaign on a ticket promoting an ‘America first’ agenda. Back in 2016, expectations around these policies – such as deregulation, a tougher stance on China and corporate tax cuts — led the S&P 500 to post significant gains in the first 100 days after the election. A similar pattern seems to be taking hold this time too. Refresh this chart in your browser | Edit the chart in Datastream Speculation about the prospect of looser financial regulation, a

Fathom’s US Economic Sentiment Indicator fell sharply in March, dropping from 5.2% to 1.2%. This monthly indicator is designed to measure underlying economic activity. It uses a technique known as principal component analysis to distil the information from numerous consumer and business surveys into a single composite indicator. The ESI has been trained on quarterly GDP growth, and by construction has the same mean and variance as that series. It provides a monthly updated estimate of quarterly growth in underlying activity and displays less short-term volatility than quarterly GDP growth. Given the unprecedented shock that the US economy faces from

After a small uptick in March, Fathom’s US Economic Sentiment Indicator (US ESI) declined again last month, touching a 29-month low of 3.8%. We have long argued that the gap between sentiment and real GDP growth would close – with the former likely to decline and the latter likely to increase. By and large this has taken place, albeit at a slower pace than we initially expected. Looking ahead, it would not be a surprise if both GDP growth and sentiment continued to tick down this year and into 2020, as the effects of the large fiscal stimulus package fade

We have revised higher our forecast for US Q1 GDP growth, from an annualised rate of 2.0% to 2.8% (the consensus estimate from the Thomson Reuters Poll is 1.8%) following the release of some positive hard economic data over the last few weeks. Those data include retail sales, which rebounded in March, solid US housing data and a quicker-than-expected increase in exports in the first two months of this year. Refresh the chart in your browser | Edit chart in Datastream Refresh the chart in your browser | Edit chart in Datastream Refresh the chart in your browser | Edit chart in Datastream Our revision coincides

Although the government shutdown ended nearly two months ago, it is still complicating assessment of the US economy. Some data releases were delayed and the data themselves (payrolls, unemployment, retail sales and sentiment indicators) exhibited volatility. The failure of Fathom’s US Economic Sentiment Indicator (ESI) to rebound in February suggests that the shutdown may have had more than a transitory effect and/or GDP growth was slowing anyway — both are probably true. That said, the current level of the ESI is still consistent with a solid pace of economic expansion and more than two-thirds of the ESI’s constituents are currently