Halister News

(Bloomberg) -- U.S. election outcome “does not change our view on the trajectory of the economy” for next 4-6 quarters, even as markets have repriced on the assumption that lower taxes, less regulation and more deficit spending will cause a demand shock and higher inflation, Hoisington Investment Management’s Van R. Hoisington and Lacy Hunt say in note to investors.

• For tax cuts to make a positive contribution to economy, monetary conditions must “remain favorable, not adversarial”
• Reagan tax cuts were far larger and implemented while interest rates were declining sharply; “even with fiscal and monetary conditions working in tandem, the economy was very slow to respond”
• Conditions today are initially “negative and have become more negative recently,” including total debt levels, expansion in its 7th year, rise in market rates putting pressure on velocity of money and money supply growth and disinflationary pressure from USD strength
• “Markets have a pronounced tendency to rush to judgment when policy changes occur,” were proven wrong about potential for 2009 stimulus and QE1 to ignite inflation
• Hoisington manages $5.9b, including Wasatch-Hoisington U.S. Treasury Fund (3.5% avg annual return over 5 years)