Morgan Stanley chief US economist Michael Gapen joins Catalysts to analyze the economic implications of increased deportations under the Trump administration.
"Tariffs get all the headlines; they're the bright shiny objects in the news flow right now," Gapen states, while emphasizing that investors should not overlook immigration dynamics.
Gapen highlights how post-COVID immigration surges boosted economic growth and labor supply while simultaneously tempering wage growth and inflation. He warns that if the US were to "restrict immigration," this positive economic narrative could go into "reverse," potentially hampering growth momentum.
Addressing monetary policy implications, Gapen explains, "The baseline view would be ... trade restrictions, immigration restrictions — that should mean a slower growth, stickier inflation outlook, [and] a Fed that cuts but cuts later. The baseline isn't a recession, it's just a moderation in activity."
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This post was written by Angel Smith