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Peter Navarro: Trump Should Get the Second Term!

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Aug. 27 2019, Updated 8:11 a.m. ET

On August 23, Peter Navarro spoke to Fox Business. He said, “The only way we get a recession in the distant future is if a Democrat sits in the White House.”

Is Peter Navarro right about the economy?

In this context, Peter Navarro was referring to the presidential election in 2020. He might have meant that President Trump should win his second term. Earlier in August, Navarro warned China that it would need desperate measures if the yuan continues to fall. Notably, Navarro is President Trump’s trade adviser.

On Monday, in a different interview with Fox Business, Mark Vitner, a senior economist at Wells Fargo, said that between 2009 and 2016, the average GDP growth rate in the US was 1.9% per year. He said that in the last few years, the GDP grew at an average of 2.6%. President Trump won the US presidential election in 2016 and assumed office on January 20, 2017. Vitner added that the rollback in regulations helped spur economic growth. President Trump’s tax cut also boosted the US economy.  

In the same interview, a Fox Business anchor highlighted the Trump administration’s achievements. Notably, 5.6 million jobs have been created since President Trump took office. In May, US unemployment fell to 3.6%—the lowest level in the last 49 years. Last month, the unemployment rate was at 3.7%. During the Obama administration, the GDP grew at the lowest rate for any presidential tenure since 1945.

So far, the S&P 500 Index (SPY) has risen 14.8% in 2019. Among the four largest economies, none of the equity indexes have seen a double-digit rise. At the current valuation, the S&P 500 Index is trading at a PE ratio of 19.9x. The S&P 500 Index’s 15-year average PE ratio is 17.4x.

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Odds of a recession

On August 26, in an interview with Bloomberg, Ann-Katrin Petersen said that over the next 12 months the recession probability is more than 80%. Petersen is an Allianz GI investment strategist. She said that fundamentally, the US dollar is overvalued. However, the US dollar could appreciate more against Asian currencies. The dollar might depreciate against a developed market safe-haven like the yen. A stronger US dollar could have a negative impact on the Asian equity market. Navarro told Fox Business that the Fed’s decision to reduce the interest rate could weaken the US dollar, which could boost US exports.

Peter Navarro discussed the USMCA 

In the interview with Fox Business on August 23, Peter Navarro said that Congress will pass the USMCA (United States-Mexico-Canada Agreement) bill. The bill aims to create an equal opportunity for Mexico, Canada, and the US that was absent in the earlier NAFTA trade agreement. Renegotiating the NAFTA agreement was a key agenda during President Trump’s 2016 election campaign. According to the Office of the United States Trade Representative, the USMCA bill will increase wage growth and boost the North American economy.
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Jerome Powell

Peter Navarro was asked about what he wants to hear from Fed Chair Jerome Powell. He said maximizing the growth and not minimizing the employment rate. Also, growth shouldn’t cause inflation. He also wants an “acknowledgment of chess match here when other central banks around the world are lowering their rates that does have negative currency effect and we need to patch them.” Finally, Navarro wants Powell to say, “America we have your back.”

China’s retaliation

When asked about the trade war and China’s retaliation, Peter Navarro said that he doesn’t agree. He said, “China is bearing the entire burden by slashing their prices, slashing the currency value, and by the way they are hemorrhaging – hemorrhaging their supply chain out to the rest of the world and back here in America.” He said the US is behind President Trump to stop China from stealing technology and intellectual property. Based on a CNN/SSRS poll result released on August 24, President Trump’s approval rating is at 40% compared to 43% in June. Peter Navarro said that smart investors should stay away from any type of recession fears. The US is stronger. A fiscal stimulus across the globe could help avoid a slowdown.

On August 25, on the sideline of G7 meeting, a reporter asked President Trump, “Are you going to declare a national emergency on China?” President Trump replied, “Well, I have the right to, if I want. I could declare a national emergency. I think when they steal and take out, and — intellectual property theft, anywhere from $300 billion to $500 billion a year, and where we have a total loss of almost a trillion dollars a year — for many years, this has been going on — in many ways, that’s an emergency.”
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