As the fiscal stimulus fades and the lagged impact of monetary tightening intensifies, we expect GDP growth to slow from 2.9% in 2018 to 2.2% in 2019 and only 1.2% in 2020. Markets apparently believe the biggest downside risk is that the US-China trade dispute worsens. With both sides apparently intent on making a deal, however, that could even turn out to be a minor positive in 2019. To our minds, the biggest downside risk is a prolonged Federal government shutdown that morphs into a full-blown debt crisis sometime in the first half of next year.
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