MCHI is constructive on the near-term outlook for the U.S. economy, but risks to forward growth are mounting from late-cycle headwinds and potential downside risks from domestic and global policy.

• The U.S. economy continues to grow at a healthy pace with real GDP growth of 3.0% Y/Y, a strong labor market boosting consumer spending and confidence, and robust, if moderating, businesses activity, confidence, and capex.
• Economic growth is likely to decelerate in 2019 due to meaningfully tighter financial conditions, negative trade policy impacts, a fading growth impulse from earlier fiscal stimulus, and the lagged effect of tighter monetary policy.
• In our view, the greatest risk to U.S. growth is spillover from slowing global growth, most notably China and the European Union. These economies (and others) have been negatively impacted by tariffs / trade policy, which continues to impact supply chains, input costs, and business confidence.
• Key factors shaping the outlook for U.S. growth include the outcome of U.S.-China trade talks, the potential of Federal Reserve rate increases and balance sheet normalization, and the resolution of the U.S. government shutdown.