By: Tim Hoyle, CFA, Chief Investment Officer

We were delighted to welcome Dan Clifton, Head of Washington Research for Strategas Research Partners, as a featured guest at our Midsummer Outlook Brunch in Avalon. Dan thrived in the salt air as he provided a comprehensive overview of policy and politics, covering an extensive range of topics for a group of about 100 Haverford Trust clients.

Here are some key takeaways from our discussion:

• Presidents require real income growth for re-election. Despite the administration’s anti-fossil fuels rhetoric, their approval of pipeline projects is one example that they recognize the importance of keeping energy costs low and improving current income numbers relative to inflation.

• The Inflation Reduction Act (IRA), Infrastructure bill, and CHIPS Act have established lasting incentives for the next decade. Like the Affordable Care Act and the Tax Cuts and Jobs Act, these seminal bills are likely to undergo some future adjustments but should remain substantially intact, regardless of the party in power in D.C. The price-tag of the IRA incentives is likely to exceed $1.2 trillion, fourfold the original estimate.

• China containment is one of the only current policy issues where bipartisan agreement can be found. Foreign direct investment in China has fallen, and Chinese imports as a percentage of total U.S. imports are at their lowest level since 2005. China is experiencing deflation and the anticipated “great reopening” has not materialized. These conditions will probably lead to a more conciliatory tone regarding Taiwan.

• The cost of servicing the Federal debt is rising rapidly. Higher interest rates and continued deficit spending have pushed interest expense as a portion of Federal spending to over 13%, with continued increases projected. As in the early 1980’s, when then little-known economist Alan Greenspan led the commission to ensure the long-term financial stability of Social Security, reforms are currently needed to ensure fiscal solvency for future generations.

Source: Strategas Research Partners
Source: Strategas Research Partners

There were many topics and questions from our engaged audience that we could not fit into the discussion.  In future commentaries, we will address these and any other questions you may have. We encourage you to reach out to the team over the summer and we look forward to welcoming Dan back this fall as a guest on our podcast, Speaking of Quality: Wealth Management Insights with Hank Smith.