US economy strong. World economy recovering. Markets will storm back!
Great time to host another Peeptrade University Challenge 🙂
By Ali Bakir
In a nutshell:
- The economy is doing great. It was already in decent shape, but now it’s soaring.
- A lot of that has to do with sheer “business confidence”―and there’s plenty of it.
- Is 3% annual growth sustainable in 2018? Yes, it is, if the right stars align.
- Once again, teams from the best business schools will face off in a University Challenge.
The economy? Investors are lovin’ it. The Dow Jones Industrial Average and S&P 500 Index were both up almost 5% in January. What’s not to like about that? No wonder the Conference Board reported that consumer confidence was approaching a 17-year high.
Oh, sure, there were hiccups last week that resulted in some dramatic down days, but will they last? Not likely. Carl Riccadonna, chief U.S. economist for Bloomberg Economics, said it nicely: “Business confidence has soared under Trump—and animal spirits are a critical ingredient of capitalism.” Cutting corporate taxes certainly did a great deal to boost those animal spirits.
The Market Upswing Is on a Solid Footing
Trump is the man at the helm, and the market is going gangbusters. To be fair: Trump did not do this singlehandedly. Outgoing Federal Reserve Chair Janet Yellen did her part to put the U.S. on a sound footing, as did Obama. Conditions were right for this bull market to keep chugging along. Add a little tax relief and loosened regulations, and―voila!―investment accounts and 401k’s lurch even more sharply upward.
Never a bad idea, though, to step back a moment to “see where we are” in the arc of economic news. How did we get here? Well, we came off of 2017 with the U.S. economy growing at a nearly 3% annual rate for the last three quarters. (Who knows what the growth rate might have been if we’d had an infrastructure bill pass already—or what the rate might yet become when we do pass one.)
That 5% rise in January didn’t materialize out of thin air: the pump was already primed. Now it is primed for even more spectacular gains if we can keep both business and consumer spending on the upswing.
The Really Big Question
“Is 3% annual economic growth sustainable?” It is if we can get those corporate productivity numbers, a little lackluster lately, to improve, plus get consumer spending to really kick in.
That, in turn, has much to do with employment statistics, where there is good news: after bottoming out late in 2017, workplace employment in the 25-to-54 age category is improving nicely. (As Bloomberg News notes, that is an especially useful data set to watch because it mostly excludes students and retirees.) Wages are starting to rise, too.
It is not all rosy: a lot of people who’d like to work fulltime must continue to settle for part-time, just as many who’d like to be salaried employees must settle for being contractors. Furthermore, we still have this opioid epidemic dogging our economy like a Rottweiler with a bad attitude. There are definitely still some problems that need solving.
More to Come―Including the Annual Peeptrade University Challenge
Still, it is not unreasonable to think that, despite these impediments, the employment picture will continue to improve―as will the level of consumer spending. We know corporations are stoked; maybe that “rational exuberance” is about to spread more widely throughout our entire economy. Wouldn’t that be lovely?
What a great time, then, to host the annual Peeptrade University Challenge (Feb. 19 −April 20, 2018) sponsored by Nadex! The best universities in the U.S. and overseas field teams which, armed with virtual money, compete to see who produces the most impressive investment gains. The competition is open to all students (undergraduate and graduate) interested in the equities markets, and each of the top 10 teams will receive an all-expenses-paid trip to the final event, hosted by The University of Chicago, in the Windy City.