In this month’s letter, Bill Longbrake discusses the recent surge in business, consumer and investor optimism following the election of Donald Trump as the U.S.’s 45th president and assesses the 2017 outlook. He raises the question of whether the policies of the incoming Trump Administration and the Republican-controlled Congress, combined with political and economic developments elsewhere in the world, will lead to continued slow and steady growth in the U.S., or whether growth will accelerate, or perhaps recession might occur. All are possible outcomes in coming months. Based on past experience there is a good chance that bullish expectations will not be fully realized. In addition, some of Trump’s potential trade and tax reform policies could have significant and unpredictable adverse global consequences. Given the considerable uncertainty, prudence argues for being prepared to manage through any and all possible outcomes.
This month’s Longbrake letter consists of two parts. Part I is a final assessment of observations Bill made a year ago about how the U.S. and global economies might fare in 2016. As one might expect, Bill’s track record is mixed. The U.S. and global economies are dynamic and ever changing. Some trends are foreseeable. But, governmental policy intervention, whether it be political or economic, can alter outcomes and set in motion feedbacks that significantly affect economic developments. In this respect, 2016 was no different from any previous year. Part I also includes commentary about key U.S. and global economic and political developments that seem possible, perhaps likely, in 2017, along with a list of possible risks that could derail expected developments. Part II of December’s Longbrake letter explores a 10-year economic outlook for a variety of measures of economic activity and compares four of Bill’s scenarios with projections of other professionals including the Congressional Budget Office.
In this month’s letter, I include a final assessment of observations I made a year ago about how the U.S. and global economies might fare in 2016. You will find that I got some things right and many things wrong. The U.S. and global economies are dynamic and ever changing. Some trends are foreseeable. But, governmental policy intervention, whether it be political or economic, can alter outcomes and set in motion feedbacks that significantly affect economic developments. In this respect, 2016 was no different from any previous year.
Such will also be the case in 2017. Nonetheless, I once again attempt to summarize key U.S. and global economic developments that seem possible, perhaps likely, in 2017. I also list risks to the 2017 outlook.
I wish all a very joyous holiday season!
In a stunning surprise, Donald Trump was elected to be the next president of the U.S. Bill Longbrake explains in this month’s letter that Trump’s success should not have come as a surprise. A majority of Americans have become increasingly dissatisfied with changes in America’s social, political and economic fabric, which many view as demeaning the value and dignity of their work and undermining the opportunity to live the American dream. In this context, “Make America Great Again,” resonated. Longbrake notes the markets’ euphoric response to the anticipated economic benefits of aggressive fiscal stimulus, but cautions that uncertainty has increased and with it the odds for recession. Bill summarizes the probable domestic and international impacts of Trump’s election and examines the economic impacts of several fiscal stimulus options. Read the full letter here.
If one only listened to the consensus, one would be optimistic, notwithstanding the ugly US presidential contest, that the US economy is moving forward steadily with strong employment, low inflation, and low interest rates. In this month’s letter, Bill Longbrake takes a more critical look at recent data and discusses the consequences of years of aggressive and market-intrusive monetary policy, which leads him to a much different and more troublesome outlook. According to one well-respected economic research firm, there is now a 50-50 chance of recession in the next 12 months. The strong third quarter real GDP report was a mirage that hid a steady six-quarter long deterioration in growth momentum.