We've called the slow, plodding economic recovery from mid-2009 through early 2017 a Plow Horse. It wasn't a thoroughbred, but it wasn't going to keel over and die either. Growth trudged along at a sluggish – but steady - 2.1% average annual rate. Thanks to improved policy out of Washington, the Plow Horse has picked [...]
The stock market is on a tear. The S&P 500 rose 19.4% in 2017 excluding dividends, and is already up over 4% in 2018. It's not a bubble or a sugar high. Our capitalized profits model, says the broad U.S. stock market, is, and was, undervalued. We never believed the "sugar high" theory that QE [...]
Bonds have been in a "bull market" for the past thirty-seven years. Not every quarter, or every month, but bond yields have fallen consistently since Paul Volcker ended the inflation of the 1970s. And just like any long-term bull market or bubble justifications proliferate. The current 10-year Treasury yield is 2.46%, which equates to a [...]
One word that could describe Donald Trump's unexpected ascendancy to the presidency is – "revolt." Revolt against the "establishment." Revolt against the "status quo." After all, status quo bureaucracies, tax rates, institutions, regulations, and narratives promised prosperity, yet the economy was mired in slow growth and many felt it was hard to get ahead. Reliably [...]
Posted Under: Monday Morning Outlook The Bible story of the virgin birth is at the center of much of the holiday cheer this time of year. The book of Luke tells us that Mary and Joseph traveled to Bethlehem because Caesar Augustus decreed a census should be taken. Mary gave birth after arriving in Bethlehem [...]
Posted Under: Bullish • GDP • Government • Markets • Monday Morning Outlook • Interest Rates • Spending • Taxes • Stocks Last December we wrote "we finally have more than just hope to believe that this year, 2017, is the year the Plow Horse Economy finally gets a spring in its step." We expected real GDP growth to accelerate from 2.0% in 2016 to "about 2.6%" in 2017. Our optimism [...]
Posted Under: Government • Monday Morning Outlook • Productivity Models of the economy are pretty useful tools. And simple models are some of the most useful. They help people envision how the world works. They help organize thinking. For example, the model that says potential U.S. economic growth is determined by "population (labor force) growth" plus "productivity" is an [...]
Bullish • Government • Markets • Monday Morning Outlook • Fed Reserve • Interest Rates • Stocks The Federal Reserve has a problem. At 4.1%, the jobless rate is already well below the 4.6% it thinks unemployment would/could/should average over the long run. We think the unemployment rate should get to 3.5% by the end of 2019 and wouldn't be shocked if it got that low [...]
Now that Black Friday has come and gone and Cyber Monday is upon us, you're going to hear a blizzard of numbers and reports about the US consumer. So far, these numbers show blowout on-line sales and a mild decline in foot traffic at brick-and-mortar stores. Both are better than expected given the ongoing [...]