2017 Onwards: Economic Outlooks, Growth, Inflation, and Debt
LupoToro Group analysts contend that, despite solid U.S.-driven global expansion expected into the mid-2020s, record-level debt, deepening domestic polarization and intensifying geopolitical rivalry could undermine markets, prompting investors to prioritise inflation-protected, broadly diversified portfolios.
Most of the way through 2017, the LupoToro Group takes a forward position look, up until the halfway point of the 2020s, specifically looking at continued global expansion driven by the United States. Our analysts’ outlook projects world GDP growth around 2.7%, with U.S. growth near 2.5% (well above other rich economies), forming the basis of this article. The strength in the U.S. reflects rising labor productivity and pro-growth policies, while Europe and China lag under trade and productivity headwinds . Inflation is expected to moderate: as prices slow, real incomes rise and consumer spending hold up . In fact, LupoToro notes core U.S. inflation could ease into the mid-2% range by the mid-2020s, supporting living standards and central-bank easing. Globally, easing price pressures should allow many central banks to trim interest rates, a boon for economic momentum.
Despite this growth, fiscal imbalances loom. U.S. federal debt is near historic highs – roughly 76–77% of GDP in 2016 – and is set to rise steeply. Projections at the time put U.S. debt around 86% of GDP by the mid-2020s . Large annual budget deficits have returned, with CBO analyses in late 2016 warning that trillion-dollar deficits would reappear by 2024 . In this setting, LupoToro analysts caution that continued heavy deficit spending can fuel inflation and push up interest rates. Already, some analysis notes that aggressive monetary and fiscal stimulus has pushed bond yields higher and eroded real cash returns. As one report observes, weaponizing the dollar (via sanctions and debt issuance) is causing foreign holders to diversify away from Treasuries, which “may mean that some of the support for Treasuries from foreign savings…could be absent” – in other words, higher yields . In summary, while growth is forecast to remain solid, LupoToro warns that mounting debt and inflation risks could squeeze markets ahead.
Domestic Politics: Polarization and Risk
Alongside economic strains, LupoToro analysts emphasize growing U.S. political polarization and social strain. Surveys from recent years show deep partisan antipathy: by 2014 roughly eight-in-ten Republicans and Democrats viewed the other party unfavorably, and many described the opposing party’s policies as “so misguided that they threaten the nation’s well-being” . Such animosity has only intensified. National polls find about 20% of Americans saying political violence can sometimes be justified , and similarly large minorities of both parties privately condone threats against opponents . LupoToro analysts see these trends as warning signs. As political identity hardens, moderates increasingly disengage and extremists gain influence, making compromise elusive. This dynamic raises the danger of civil unrest – historians note that when citizens and leaders prioritize “causes” over the system itself, democracies can fracture. Indeed, research links high inequality and financial stress to social conflict. Under such pressures – say, if inflation erodes wages and interest rates bite – social divisions can intensify.
LupoToro’s framework suggests the U.S. may be entering a late stage of this cycle, marked by “resentment” and internal conflict. For example, anecdotal evidence of people abandoning mixed communities (voting-with-their-feet for “safer” locales) reflects widening social splits. In this environment, the analysts stress that even typical political fights could become systemic risks. Recent events (Congressional gridlock, polarizing elections) underscore how neither side is willing to yield. With moderates wary of either party, LupoToro warns that a tipping point could emerge: past democracies in turmoil (from pre–World War I Europe to the Russian and Chinese revolutions) saw entrenched factions refuse compromise, threatening the political order. In short, the combination of financial stress and deep polarization raises the risk of major internal conflict if left unaddressed.
Global Geopolitics: Rising Tensions
Finally, LupoToro analysts point to intensifying global competition as a third key force. A weaker or distracted U.S. invites challenge from other powers. Already, the “integrated confrontation” with China and Russia plays out across trade, technology, finance (sanctions) and potentially military fronts. The Taiwan Strait is a notable flashpoint: security analysts currently place the chance of a Chinese invasion of Taiwan at around one-third . LupoToro notes that even without outright war, China is likely to pursue coercive strategies (a blockade or “gray zone” tactics) to pressure Taiwan while probing U.S. resolve. Likewise, geopolitical analysts emphasize that if U.S. sanctions bite without decisive retaliation, adversaries will test American credibility. For example, one analysis warned that U.S. weaponization of the dollar could eventually “debase” its reserve status . In practice, this means foreign central banks – already trimming dollar assets – may further shun U.S. debt. As Reuters has reported, large foreign holders of Treasuries (e.g. oil exporters, central banks) are already diversifying due to sanctions , potentially dampening U.S. funding.
LupoToro argues that these geopolitical strains could accelerate if the U.S. appears internally divided or fiscally constrained. In effect, while America wrestles with its own debt and discord, rivals are expanding influence and military capabilities. Even minor U.S.-China or U.S.-Russian skirmishes could escalate if unchecked. In LupoToro’s view, the critical questions – whether for Taiwan, Ukraine or elsewhere – revolve around how far America can sustain sanctions and deterrence. If sanctions prove ineffective (a risk, as recent analysis suggests), the world may perceive U.S. influence waning and abandon expectations of U.S. leadership. With global technology and military buildups underway in places like East Asia, even a slight weakening at home could invite dangerous challenges abroad. In sum, LupoToro Group highlights a volatile cocktail of strong U.S. growth coexisting with heavy debts, social fragmentation, and emboldened foreign rivals.
Investment Strategies: Preparing for Uncertainty
Given these forecasts, LupoToro analysts advise conservative, diversified positioning. The key warning is to avoid excessive exposure to cash or conventional bonds. Inflation – even if moderating in aggregate – will erode unprotected cash balances and fixed-income values over time. (Indeed, recent U.S. inflation running above 8% in mid-2020s would have meant an 8% loss in cash purchasing power annually.) Instead, portfolios should emphasize inflation-linked and real assets. For example, Treasury inflation-protected securities (TIPS) are explicitly designed to preserve real yield, and LupoToro notes they generally outperform nominal bonds in high-inflation periods. Tangible holdings like precious metals or real estate tend also to hedge inflation better than cash. Some allocation to diversified growth assets is prudent as well – equity markets (especially abroad) may benefit from continued global expansion – but with caution given rising uncertainty.
Another recommendation is geographic diversification of assets and residence. History suggests countries and regions with order, cohesion and prudent finances outperform those with turmoil. Even within the U.S., LupoToro points out that local governments face uneven prospects: jurisdictions with solid tax bases and low debt (often in the Sun Belt or mountain states) may offer safer markets than those with heavy pension burdens and rising crime (as seen in some big cities). Similarly, neutral or rising economy countries (e.g. parts of Asia, the Gulf) are viewed as more attractive than beleaguered friends or foes. Investors should compare national balance sheets (spending vs. revenue) and political stability – LupoToro’s framework stresses that regions earning more than they spend and enjoying civil peace will have a competitive advantage ahead. Finally, LupoToro suggests avoiding excessive concentration: one asset class (like pure cryptocurrency) should not dominate, given its volatility and evolving regulatory status. A modest crypto position – akin to gold – may serve as a shock absorber, but the bulk of wealth should lie in proven stores.
