Will Faster Growth Lead to Lower Market Returns?

Will Faster Growth Mean Lower Stock Returns?

That might seem a ridiculous question but it isn't as easy to answer as one might think. A conventional analysis says the recent tax cuts will create higher growth through a number of channels but I think primarily through increased corporate investment. As growth improves, interest rates will rise as monetary policy is "normalized". Stocks and other assets will need to adjust to this new interest rate regime. A bull would say that once this adjustment is done, stocks and other assets can then rise in step with the new, higher growth rate. I guess real bulls would say that no correction is even required, that stocks can just rise from here based on the new higher growth rate. Maybe, but markets and economies are messy beasts and there are a lot of offsetting factors involved here.