JP Morgan: The Importance of Immigration

In the early days of the new administration, no issue has been more controversial than immigration. The president’s statements on building a wall on the U.S.'s southern border, his actions on banning travel from specific countries and his heightened focus on deporting illegal aliens have generated a negative response from his opponents and a positive reaction from some of his supporters.

As with our entire 100 days of change series, we will try to steer clear of political arguments. Policies in this area do have significant implications for both the economy and, ultimately, financial markets. So what actions has the president taken and advocated, how might these affect both illegal and legal immigration and what could this mean for growth, inflation and investment returns?

Read the entire market commentary here. 

In Brief:

• Early actions and statements by the Trump administration suggest significant changes to both illegal and legal immigration into the U.S.
• Fewer illegal immigrants could lead to labor shortages and higher wages, particularly in domestic services, construction and agriculture, with some drag on overall economic activity.
• Reduced legal immigration, if it occurs, would have greater negative consequences for the overall economy, starving the economy of working-age persons at a time when the retirement of the “baby boomers” is contributing to slower economic growth.
• It is not yet clear if the administration’s policies will lead to a net decline in the pace of U.S. immigration. If it does, however, the implications would be negative for both U.S. equities and fixed income, underscoring the importance of international diversification.

Review the full commentary from JP Morgan, or read a previous article from their 100 days of change series: Trade Policy Chess.

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