The Macro Report | January 2017

Real rhetorical deals

As of mid-January 2017, the markets are taking an optimistic view of what the new Republican control of Washington will bring. Looking back, December 2016 looks like a classic “risk-on” move, with global equities performing well and long Treasuries performing poorly. While the future of U.S. policy remains largely opaque and, for now, purely rhetorical, we know what signals to watch for in the coming weeks.

This month we examine three dimensions of risk emanating from Washington D.C., and provide a roundup of key considerations for central banks in the United States, Europe, and Japan. Lastly, we continue our examination of China — focusing this month on how Chinese authorities are grappling with their currency problems. For 2017, the China puzzle remains, but the biggest uncertainty concerns the U.S. growth path under the deal-making aspirations of Trumponomics.

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The business of making or breaking deals under Trumponomics may carry big risks for the economy.