The economy and Equities
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Started by TimNew - Feb. 16, 2018, 5:51 a.m.

For years,  I've been saying that any president following Obama could be an economic superstar, and it would be easy,  even allowing for a few mistakes along the way.

Obama took the reigns during the greatest economic crisis of my lifetime and I would not envy anyone in that position. Setting that aside...   History tells us that physics and economics have some parallels. For example, in physics, the angle of refraction equals the angle of reflection. In economics, the angle of recovery matches the angle of the preceding crash.  The more dramatic the crash, the more dramatic the recovery..  Assuming the laws of economics are allowed to function.

In Obama's admin,  the economic policy was to throw anchors to a drowning economy. Just about every law, regulation, policy worked to impede business growth.  As a result, we had one of the most anemic economic recoveries in the history of capitalism. Lots of money was left on the sidelines or invested overseas and business functioned in preservation instead of growth mode. Profit growth was more a function of cost cutting than business growth.

Enter a president who, in spite of all his flaws, has a basic understanding of how money/business works.

The first rule in economics and government..  Government cannot create a strong economy, but they can sure create a weak one. Currently, almost every measure of the economy is reading very strong.  At the upper range of historic measures. Trump did not do this.  He is simply allowing it through deregulation and tax cuts. I hope he limits himself to these measures.  They are more than adequate.

Money is coming off the sidelines and back from overseas. Consumer and business confidence is at all time highs. Job creation remains in a pattern similar to what we've seen but that will change dramatically over the next year. Wage pressure is finally appearing.  Voluntary Quits, a measure of employee confidence, are still low but climbing.

Another rule..   Employment is a trailing indicator. Employers are reluctant to lay off during slow downs and conversely reluctant to hire during growth.  But, looking at the job opening reports, the biggest problem now is finding qualified applicants for record level job openings. In spite of assorted demographics, Employment Participation will begin to creep up. 

Getting to equities,  markets never go straight up over the long term, and they never go straight down.  We're in for a bumpy ride, IMO.  When the market rises too far too fast, participants get nervous. Any potentially bearish news will send them racing for the door with the profits they already have. This will have nothing to do with underlying stock valuations and will remain a buying opportunity for the foreseeable future. You can try and time the tops and bottoms at your peril. I'll keep cash handy for buying dips/corrections.

As a caveat,  this could have been posted in the TR section, but I suspect resulting discussion, if there is any, will likely become NTR. 

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