Message to Trump: Focus on the economy already

By Jonathan Stempel

NEW YORK (Reuters) - A week after his Republican Party lost majority control in the U.S. House of Representatives to Democrats, President Donald Trump is getting advice from economists and investors to sharpen his focus on a possible winning issue for him as the 2020 White House campaign gets under way: the economy.

"If I were his campaign manager, I would stress how well the economy is doing," said Byron Wien, vice chairman at Blackstone Private Wealth Solutions Group in New York, and one of several speakers at the Reuters Global Investment 2019 Outlook Summit to offer the president advice.

"He'd rather talk about emotionally charged issues, like immigration," Wien said. "But in fact the pace of the economy, the level of unemployment, the slow increase in inflation are achievements that he should be happy about. They occurred on his watch."

Trump has reason to celebrate an economy that has benefited from tax cuts and stimulus enacted in his first year in the White House, despite expectations they will cause the federal budget deficit to rise.

Unemployment sits at a 49-year low of 3.7 percent, while consumer confidence has reached an 18-year high and wage growth a more than nine-year high.

Gross domestic product, meanwhile, grew at a 3.5 percent annualized pace in the third quarter, the Department of Commerce estimated, above what economists call its longer-term annualized growth potential of 2 percent.

Trump, nevertheless, has focused much of his recent public policy attention on immigration and on trade with China, where the administration has imposed new tariffs and threatened more as it pursues concessions on intellectual property, technology and access to local markets.

"President Trump is notorious for surprises," said Scott Minerd, global chief investment officer of Guggenheim Partners in New York, which invests $265 billion.

"The administration recognizes that in the short run it has the upper hand," he continued. "Having said that, I'm not so sure that in the long run that should be our policy solution."

FED-BASHING

Trump has also questioned whether the Federal Reserve might choke off the nine-year economic expansion by raising interest rates too fast, telling Reuters in August he was "not thrilled" with the chairman he appointed, Jerome Powell.

Summit guests said the Fed will want to raise its benchmark interest rate, now 2 percent to 2.25 percent, another 0.25 percentage points in December, with more increases in 2019.

With the economy enjoying a "sugar high," any "Fed-bashing by Trump could backfire. It's almost counterproductive," said Joachim Fels, group economic adviser at Pacific Investment Management Co in Newport Beach, California, which invests $1.72 trillion.

"The Fed may want to pause and will want to pause at some stage next year," Fels said. "They don't want to be seen as taking orders from the White House."

Richard Bernstein, who runs Richard Bernstein Advisors LLC in New York and was once Merrill Lynch & Co's chief investment strategist, said Trump often gets distracted on other issues, such as imposing sanctions against Iran, with no follow-through.

"Talk about shooting yourself in the economic foot," said Bernstein, who oversees $9.5 billion. "You had people talking for months about the Iran sanctions, and then ... they granted waivers to everybody who asked for a waiver. So what was the point of getting everyone nervous for six months?

"If I were president," Bernstein said, "I would be crowing about the economy and I wouldn't be talking about anything else. But I'm not the president."

Like many others, Wien, a former Morgan Stanley chief U.S. investment strategist, suggested that Trump curtail use of one of his own favorite mediums to communicate: Twitter.

"I would tell him to close his Twitter account," said Wien, who is 85. "He trusts his instincts, and just as all of my essays get edited by somebody, all of his instincts should be edited by somebody."

(Reporting by Jonathan Stempel in New York; editing by Jennifer Ablan and Tom Brown)