Slower Economic Growth in Q3. Consumption, Government, Trade...Add it all up, and we get 2.0% annualized real GDP growth for the third quarter, nowhere close to the “sugar high” 6.5% annual rate of growth in the first half of the year.
Respect Millennials. The bottom line is that, at the same point in their lives, the average Gen Xer is better off than the average Boomer and the average Millennial is beating the average Gen Xer.
Focus on the Data, Not the Political Spin. The bottom line is that the employment report really wasn't that bad. Yes, some disappointing numbers, but the economy has not ground to a halt.
The Cost of Lockdowns. It is now clear that the cost of the lockdowns is immense. Locking down the economy threw complicated supply chains into chaos, and restarting them is not as easy as many seem to think.
Less Government, More Employment. The US economy is far from fully healed from the COVID19 disaster. But now that the government has stepped back from extra large payments to the unemployed, we think the labor market is on the verge of a big step forward.
Resist Inflation Complacency. Some analysts and investors breathed a big sigh of relief on inflation when it was reported last week that the Consumer Price Index rose 0.3% in August versus a consensus expected 0.4%. But we think any sense of relief is premature.
Stocks vs. the Economy. The bottom line is that we are bullish for now, but fully recognize that we have been in a pristine environment for stocks...The market is not overvalued, but it is not as undervalued as it once was.
Can the U.S. Economy “Fully Recover”? In the end, a "full recovery" of the economy is possible, but damage from past or future shutdowns – and a large partisan bill that once again, like New Deal or Great Society legislation, significantly increases the influence of the government over the economy – threaten its pace.
Bullish on a Target of 5,000 for the S&P by Year's End. There are obviously risks to this forecast. 1) The US could "lockdown" the economy again over the Delta variant of Covid. 2) The Fed could raise rates more quickly. 3) President Biden, and the Democrats, could push through major tax hikes.
Fed Being Tempted Into SIN. We think consistently higher inflation is a bad idea. Printing more money is not a path to sustainable prosperity. Higher inflation would make business planning more difficult and reduce the "real" (inflation-adjusted) wages of workers, particularly those with the least bargaining power, including lower-income workers.