News that Donald Trump Jr. met with a Russian lawyer described as having potentially damaging information on Hillary Clinton during last year’s presidential campaign dims the U.S. economic outlook, according to Dan Ivascyn, group chief investment officer at Pacific Investment Management Co.
President Donald Trump’s key initiatives such as a health-care overhaul, tax cuts and fiscal stimulus are less likely to win approval before the 2018 mid-term elections as controversies build, Ivascyn said.
“We’re becoming a bit more cautious about the possibility of meaningful legislation,” Ivascyn said Tuesday in a telephone interview from his office in Newport Beach, California. “These types of distractions are just going to make it even more difficult to gain consensus.”
U.S. stocks dipped and trading volume spiked intraday after the release of emails by the younger Trump about meeting with the lawyer, who an intermediary said had “very high level and sensitive information” that could help his father’s campaign. The revelation comes amid multiple investigations into meddling by Russia during the election.
The developments mean the economy will grow slower than the Trump administration’s projections of 3 percent, Ivascyn said. Pimco’s long-term outlook is for 2 percent U.S. growth, for inflation about 2 percent and a federal funds rate about 2 percent to 3 percent, according to a May 31 report.
As a result, the Federal Reserve will continue its slow path of raising rates and unwinding its $4.5 trillion balance sheet, rather than rushing to head off an overheated economy, according to Ivascyn.