Tag Archives: Government

Global Economic Improvement, Steep Budget Cuts, and Unfazed Financial Markets

The Economy: Global economies appear to be improving with Germany and France leading the way in Europe. The U.S. continues to present a mixed picture. The Fed released its minutes on Wednesday. They looked through the data to indicate another interest rate increase in June. While some see the Fed as increasingly hawkish, actions speak louder than words and the Fed has been unwilling to inflict the pain that rising rates will bring. With the explosion of information provided by the internet, a solid case can be made for any position that suits your fancy. Believers who warn of bubbles are countered by equally sage adherents on the other side of the argument. While we’re awash in the rhetoric of change, it’s questionable how much will be legislated given all of the animosity. The Trump budget proposes the largest cuts in decades. But like the rest of the agenda it’s so steeped in emotion that its final form is impossible to discern. Add the Special Prosecutor to this witches brew and you can almost hear the wheels of government grinding to a halt.

Food for Thought: Financial markets are unfazed by this circus and continue their 8-year bull run. Interest rates remain at historic lows. Bond yields remain suppressed. Investors are convinced that Central Banks will continue to inflate asset bubbles into the foreseeable future. Terrorism remains a blight; though the vernacular has morphed from calling them Freedom Fighters to calling them Losers. That’s an accurate step in the right direction. Never give in; never give up; never stop dreaming; never stop believing. Enjoy your Memorial Day Holiday!

Music of the Week: Bob Mamet’s “Day Into Night”

New Year New Expectations

The Economy: Much of what we’re hearing about the U.S. and global economy is positive. In addition, there is a growing sense of optimism led by the business sector which is ecstatic over the idea of tax cuts and less regulation. The ecstasy has yet to be tempered by the reality of the choices that will have to be made. The World Bank has pointed out that some of the benefits of tax cuts will be offset by rising protectionism. As a result, they’ve lowered their projections for global growth. However, financial markets remain upbeat and in rally mode. The animal spirits that have been unleashed since the election may become the self-fulfilling prophecy that ignites higher U.S. economic growth. A great deal depends on how much of the Trump agenda can be enacted and how quickly it can be done.

Food for Thought: There will be a flurry of Executive Orders on January 20th that will stop or unwind years of government and business activity. How that plays out is up to speculation. Follow-up legislation is also subject. Facing what may be the most dramatic change in decades; investors seem to be confident that this sea-change will occur quickly and painlessly. Obamacare will be replaced without any of the healthcare players suffering. Strategic realignment away from free trade, global warming and bilateral defense treaties will occur without impact on profits. Strict constructionism will take place without consequence. 80-years of immigration will be changed without economic effect. Mom used to tell us, “You can’t make an omelette without breaking eggs.” Review your exposure.