We should not forget that in the United States, financial shocks have significant impacts on the real economy

When preparing growth forecasts for the United States, and since there has been a noteworthy deterioration in US financial markets since October 2018, we have to keep in mind that financial shocks have significant impacts on the real economy in the United States: Wealth effects associated with the value of equities are substantial; A widening of credit spreads is highly detrimental for US companies, which raise financing by issuing bonds. In addition, it triggers a vicious circle since bond issuance finances US companies’ share buybacks; The financing of the US external deficit is made difficult by the deterioration in US financial markets, which leads to capital outflows as non-resident investors are concerned about the situation of US financial markets.