Laperriere sees slow GDP growth for U.S. in 2016

FAIRLAWN, Ohio—All signs point to slow gross domestic product growth in the U.S. as 2016 rolls on.

At least that's the expectation of Andrew A. Laperriere, head of policy research at Washington-based Cornerstone Macro, founded in 2013 by Laperriere and three other experts in their fields to provide economic, policy and strategy research for institutional investors.

He analyzes how tax, budget, trade, health care, banking, housing, energy and other policy changes could impact the economy and financial markets. He also tracks geopolitical developments, elections and political trends.

Before founding Cornerstone Macro, he was senior managing director at ISI Group and head of its policy research team. Prior to that, he spent eight years on Capital Hill working for former house majority leader Dick Armey.

Speaking about the economic outlook at the International Silicone Conference in Fairlawn, Ohio, Laperriere said he expects growth in the first quarter to be around 1.9 percent and around 2 percent for much of the rest of the year.

Odds of a U.S. recession in 2016 are quite low, he said.

That's the positive news.

The bad news is it's a presidential election year, and two candidates without a lot of appeal likely will be squaring off against one another for the presidency, he said.

Of course, the actual election won't occur until November. And, although there could be a good deal of unrest this year, significant political changes with a new administration won't begin until 2017.

Looking at the economic outlook for the remainder of 2016, Laperriere cited six tailwinds spurring the economy: low interest rates, low energy prices, healthy domestic corporate profits, healthy U.S. consumer balance sheets, a rising trend in household formations and the broadening impact of a manufacturing renaissance.

On the other hand, he said six headwinds that could hinder the economy include: a China slowdown and recession, European market slowdown and recession, a declining trend in U.S. multinational corporate profits, unwinding of the U.S. energy boom, geopolitical turmoil, and Washington political uncertainty.

Basically, he said, the tailwinds and headwinds pretty much offset each other.

Laperriere, who views the economy from an investor prospective, said the bottom line is “it will be a lame economic recovery.” But it could be worse.

Across the globe, he noted, countries are struggling. For instance, Europe continues to have economic problems, Japan is flat on its back, Brazil is in a recession, and China's production is slowing down and the country's employment is weakening.

The big risk globally is that China is in bad shape and that U.S. multinationals and commodities will be impacted, Laperriere said.

On the U.S. political front, Republican front runner Donald Trump's favorable rating is low, but improving a little, the analyst said. On the Democrat side, Hillary Clinton has a slightly better rating, he said, but it's also low.

As of mid-April, Laperriere figures Clinton was up 6 percent on Trump. And if the election were held now, he said, odds are Clinton would win. In fact, he said, she could crush Trump.

If Clinton were to win the presidency, and the Democrats gained a majority in the Senate, Laperriere predicted, it is likely tax hikes will be in play. Those include taxes on capital gains, personal income, inversions and overseas profits banks, he said.

Under Clinton, climate change probably will be a priority, minimum wage would be $15 an hour, and new drug pricing proposals are likely. Other winners include infrastructure and alternative energy.

Losers likely include the overall market, pharmaceutical, biotech, banks, energy, restaurants and retail, Laperriere said.

If Trump were to win the presidency, it is currently less clear what sectors would benefit. Probable winners would be defense and infrastructure, according to Laperriere.

However, there's far less known about what Trump's would do as president than there is about Clinton at this point, he said. That will change in the next five months as the public learns more about Trump and his stand on a variety of issues.