Moderate Growth in Q4. Here’s the thing: international trade and inventory figures are likely to have a huge impact on Q4 real GDP, with international trade a positive factor and inventories a negative. Trade relations with China were very volatile until recently, in part explaining a big drop in imports in Q4, which has a temporary positive influence on GDP. But, at the same time, fewer imports also meant less inventory accumulation in Q4.
The Gift That Keeps Giving. The economic expansion isn’t going to last forever, but look for the US economy to continue to outperform the doubters until the doubters realize their model of how the economy works has a fundamental flaw.
Blame the Overweight Jockey. In other words, the jockey (size of the government) got fat and weighed down the horse. If they truly want faster growth, policymakers need to focus on slimming down the government, not growing it under the guise of boosting “aggregate demand.” Tax cuts and regulatory relief help. More spending, more bank regulation and negative interest rates have failed to produce results. If we want 3-4% real growth in the future, spending restraint is the answer.
What a year! As of the close on Friday, the S&P 500 was up 29.2% in 2019. The current expansion won’t last forever. But we don’t see it ending anytime soon.
Greedy Innkeeper or Generous Capitalist? The Bible story of the virgin birth is at the center of much of the holiday cheer this time of year.
Good News is Good News. It’s no wonder that the stock market liked what it saw on Friday, a robust job market and healthy economy, and lifted the S&P 500 to its second-highest close on record, just off the November 27 all-time high. Only sixteen trading days remain this year (including today) and, as of Friday’s close, the S&P 500 is only 3.3% off our target of 3,250 for year-end.
S&P 3650, Dow 32,500. Needless to say, we don’t see a recession anytime soon. The economy is still adapting to lower tax rates and monetary policy remains loose. In addition, home builders are still generating too few homes given our population growth and scrappage rates, while banks are sitting on ample capital.
Black Friday- Don’t Worry About the US Consumer. Early reports say Black Friday on-line sales hit a record high, up 14% from a year ago, following a 17% increase on Thanksgiving Day itself. Black Friday sales at brick and mortar stores were up 4.2% from a year ago. So much for the theory that brick and mortar is dead or the economy is in trouble.
Giving Thanks. What an incredible time to be alive! We stand just five weeks from the end of a decade that saw prosperity spread far and wide. Some don’t see it that way, as pouting pundits and rancorous politics skew our visions. But, if we simply step back from the day to day noise and take in the magnitude of progress around us, there is a great deal to be thankful for.
Long Live the Bull Market. Stocks are still cheap, the economy is not slipping into recession. The policy environment is tilted more toward growth than it was three years ago, even though it could be better. And that means the bull market should continue.