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Daily Blog

Wednesday, July 18, 2018

Mid-point in the year and the U.S. continues to look strong and rocking better than the rest of the world. The consensus for Q2 (published 7/27) is 4%, up from the 2% recorded in Q1. GDP has not printed 4% since mid-2014, and that was following a -1% Q1. The Bloomberg consensus for 2018 as a whole is 2.9%. The National Association of Business Economists (NABE) has an interesting, but I believe a mainstream, look at the economy. While the economy has solid momentum they do not believe that the economy has yet to feel the effects from tax cuts which they forecast will add +0.3% in 2018 and +0.4% in 2019 followed by a 2020 recession. Why? Many forecasters believe that the economic ventilation since January 2017 will deliver just a step rise in the level of GDP before returning to the prior “New Normal” sub-2% trend growth. To be fair, it is a theoretically sound viewpoint – it is tough to call a new trend until there is some evidence of a new trend.

Still, I believe that the generic view underestimates the impact of an investment rebound and there are nascent signs one is developing. Productivity growth is back above 1%; a modest improvement but as the aphorism notes a 1,000 mile journey starts with a couple of steps. The Bloomberg Consensus sees private investment having risen by 7.5% QoQ in Q2, after the strong 7.5% of Q1. It was the outright fall in the capital stock from Q3 2015 to end-2016, which is the key culprit in the U.S. economic malaise. To wit: even slow labor force growth needs a rising capital base. ISM New Orders remain well above 60 and are further good signs for 2018 investment. - Special Guest Blogger: Tim Kearney, PhD

Weekly Commentary & Statistics

Monday, July 16, 2018

Markets mostly gained for the week as investors bet on upcoming earnings news, ignoring trade tensions and President Trump’s NATO provocations.

Monthly Commentary & Outlook

July 2018

Strong economic news punctuated the first half of the year, yet markets remained mired in struggle. Main Street has been celebrating as the economy has quietly amassed record highs in U.S. wealth, employment and spending.

  • The economy is quietly enjoying a “stealth” economic boom driven by pro-business tax cuts
  • Small business optimism on a “stratospheric trajectory” resulting in robust expansion plans
  • Trade tariff retaliation, rising inflation and a rising U.S. dollar spike global market volatility
  • Strength amidst uncertainty argues for broad global diversification

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