We think it was Art Laffer who said it best. Let's say the US invented a cure for cancer and China a cure for heart attacks. If China decided to ban the cure for cancer, should the US retaliate by banning the cure for heart attacks?
According to the futures market, there is a 38% chance the Federal Reserve raises rates when it meets in mid-March. If the Fed were to stand by what it has said the past several years, the odds should be much higher. But the market is used to the Fed finding reasons to put off justified rate hikes.
The biggest tax debate in Washington right now is not between Republicans and Democrats, but between Republicans and Republicans. Both sides of the debate seem to understand that the US tax code, particularly the fact that the US has the highest corporate tax rate of any industrialized country, is harming the competitiveness of US companies.
The US economy has grown at an average annual rate of only 2.1% since the recovery started in mid-2009, far slower than during the economic expansions of the 1980s and 1990s.
After hiking rates in December, the chances of another rate hike from today's meeting were close to nil. But where changes, mostly modest, were made to today's statement, they point to a more hawkish stance.
The past several years have made many investors complacent about inflation. That complacency served bond bulls well.
A memorable part of President Trump's inaugural speech pointed to mothers and children trapped in poverty, rusted-out factories, a flawed school system, and crime and gangs and drugs. He described these problems as "American carnage" and stated emphatically that it "stops right here and stops right now."
Animal spirits are back!
Keynes thought a free market economy should be managed: in fact, needed to be managed. His ideas flourished in the 1930s when the US was in the Great Depression. Keynes believed that a lack of consumer demand was the culprit to economic problems and government should spend to boost jobs and economic activity.
President-elect Trump wants a Race Horse Economy, not a continuation of the Plow Horse we've had for the past several years.
We have used the metaphor of the "Plow Horse" to define the US economy since 2009 – an economy driven by new technology and entrepreneurship (fracking, the cloud, smartphones, big data...), but held back by the friction of a growing and burdensome government.
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.
The Federal Reserve unanimously decided to raise rates in 2016 – finally! – by a quarter of a percentage point earlier today, as the markets expected. The federal funds rate is now set to hover between 0.50% and 0.75%.
Since the presidential election, the S&P 500 is up 8.4%, the Russell 2000, a small cap stock index, is up almost 20% and the Dow is closing in on 20,000. Financial stocks have surged.
If there's one theme tying together many of the policies President-Elect Trump and Congress will try to enact, it's making the US a better place to invest.
We agree that higher tax rates, more regulation and increased government spending are wet blankets on economic growth. We also think these policies hurt the very people they're designed to help.
The S&P 500 hit a low of 666 on March 6, 2009 and was up 213%, excluding dividends, through November 4, 2016. Since then, the S&P 500 is up another 4.6%, and closed just 0.5% from a new all-time high last Friday.
Elections have consequences and the impact on U.S. economic policy of last week's election will be enormous.
In the movie "Saving Private Ryan," multiple brave soldiers give their lives to save one (the last-surviving of four brothers) in World War II. During a final, chaotic and riveting battle scene, Ryan is miraculously saved, but with tremendous loss of life.
Through Friday, in spite of very good earnings reports from companies, the S&P 500 was down nine days in a row, the longest negative streak since 1980.
The Federal Reserve has laid the foundation for a December rate hike.
It's not like we all don't know that certain media outlets favor certain candidates. Some outlets seem "more fair" than others, but some go to absurd lengths to spin the news.
Real GDP has been soft in the past year, growing only 1.3% in the year ending in the second quarter. In the four quarters before that, however, real GDP grew 3%.
Two weekend articles, in major US newspapers, left us shaking our heads. The Washington Post wrote that "economic growth actually kills people," while The Wall Street Journal published a piece saying, ironically, we should get used to slow growth - it's normal.
One of the key excuses for the Federal Reserve to hold off raising rates again and again, and to raise them very slowly, is that inflation remains extremely low.
