US: Economic and political drama unfolds - BBH

Research Team at BBH, suggests that there is a large dramas being played out in the US which has economic and political acts. 

Key Quotes 

“On the economic front, there has been a series of economic data that strongly indicate that not only has the US emerged from the October 2015-March 2016 soft patch, but it has accelerated at the end of Q2.  Over the past fortnight, investors have learned of renewed strength in the US service sector PMI, a robust even if not spectacular jobs report, stronger recovery in June industrial output and manufacturing after a soft May, and mildly firmer than expected inflation gauges. 

The Atlanta Fed's model sees the US tracking 2.4% annualized growth in Q2.  The NY Fed's model puts Q2 growth at 2.2% and Q3 growth at 2.6%.  If the data retains this vigor, it would be consistent with the Fed removing more accommodation.  The global risk environment may again be the swing consideration. 

On the political front, the Republican convention gets under way. Trump's candidacy is spurring or highlighting a fissure in the Republican Party.  Therefore, leading party officials that do not attend or do not speak may be just as revealing as those who do.  Typically, the candidate enjoys a small bounce in support around the convention.  The recent closeness of national polls, which ultimately are less meaningful than polls in the swing states, reflects slippage of Clinton's support rather than a rise in Trump's support.  He has rarely drawn more than 40%.”