Krishna Memani, CIO, OppenheimerFunds:
"Let’s talk about Mr. Trump and accomplishments. This is what the challenge is with the Trump administration. At the end of the day, I think the message that they have, that is if we have good policies in place with respect to taxation, regulation and we do the right set of things, the growth trajectory for the U.S. can change dramatically. And I think it can. But one of the requirements that you have with respect to that is to make sure that there is some way to change the trend growth rate.

“So, U.S. has been growing at roughly 2%. For it to get to the next level—let’s say 2.5% and 3%—there has to be some impetus. And that impetus has to be a fiscal expansion.

“So, if Mr. Trump delivers on all the things that he’s talking about, but that doesn’t lead to a significant amount of fiscal deficit, the likelihood that the growth rate will go to 3% is pretty small, in my opinion.

“Two percent is good. Markets can sustain themselves at 2%. However, for the markets to go to the next level, it has to be a fiscal expansion. At the moment, that doesn’t look very likely.”

Loren Fox, FA-IQ:
“So, Krishna, if you’re saying heightened economic growth seems unlikely in the U.S., are there more compelling opportunities outside the U.S.?”

Krishna Memani:
"I’m glad you asked me that question because, while we are consumed with the passage of the health care bill or something like that, that really doesn’t have—the politics is very interesting. The political conversation is extraordinarily infatuating. But at the end of the day, the net impact of that on economics is relatively modest. We are at a 2% trend growth rate. We probably, if everything works out, we probably go to 2.5%. But even that is probably unlikely.

“On the other hand, Europe—who would have thought that Europe would grow at 2%? That’s where it’s getting to. So, if you can stomach the politics and the potential of dislocation in Europe because of Le Pen winning—small probability, but a risk—if you can stomach that, the opportunities in Europe are extraordinary.

“Europe has surprised us on the upside from a growth perspective in a meaningful way. Inflation is getting up there, which is a good thing. Growth is getting up there. So much so that they’re thinking in terms of tightening policy. Valuations are pretty attractive. Europe looks very interesting.

“Emerging markets. If two years ago you were to ask people what was going to happen in 2017, they would have told you China was going to blow up. And oil was going to be at $24 and really bad things were going to happen in emerging markets. The exact opposite is happening. China is not blowing up. Countries like Brazil and Argentina are on the verge of a very significant growth recovery. Countries like India are passing policies that can get them to 7% growth rate.

“So if you have, for your investors, for your clients, if you are looking for growth rates over the next two, three, five, 10, 20 years, all of that is not going to come from developed markets. Most of that is going to come from emerging markets. Emerging markets in that context, and Europe because the valuations are so off-base in Europe, I think represent far better opportunities than the U.S. right now.”

These views represent the opinions of OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the publication date, and are subject to change based on subsequent developments.

OppenheimerFunds is not affiliated with Financial Advisor IQ.

Investors may find growth rates in Europe and emerging markets attractive, particularly relative to the United States. In Europe, for example, growth has surprised to the upside, while inflation and low valuations are further contributing to a positive outlook for the region.

We believe many emerging markets appear well positioned for growth over the next several years. Contrary to general expectations, the Chinese economy is holding steady. Brazil and Argentina may be on the verge of a recovery, and India is instituting policies that offer the potential to boost the country’s growth rate.

The United States may be able to sustain its 2% growth rate, but we believe that breaking through that level will require fiscal expansion. In the current environment, we view this as an unlikely development.

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