Political noise emanating from Washington has prompted fresh concerns that a US equity market correction may be looming. But have no fear: the market often takes a leg down, only to bounce back quickly.
Following the election, stock market participants gained optimism on the view that the new administration would push through a reduction in regulations, sharply boost infrastructure spending, and achieve broad tax reform.
Growth in nonfarm payrolls rebounded in April, following a soft increase in March, consistent with a longer-term downward trend. The unemployment rate fell to 4.4%, the lowest level in over a decade.
After years of relying on monetary policy to stabilize the U.S. economy, policymakers have redoubled their commitment to stronger pro-growth fiscal policies. As post-election Washington sets its sights on growth-oriented reforms, policymakers should remember that economic growth in any nation is determined by the four basic factors of production—land, labor, capital, and entrepreneurship.
Real GDP rose at a 0.7% annual rate in the advance estimate for 1Q17, below the median forecast (+1.1%). Relatively speaking, that’s not a huge forecasting error. The headline growth figure will be revised and revised and revised over the next few months.
Consumer spending accounts for 69% of Gross Domestic Product. Last week, the data on the household sector were mixed. The Conference Board’s Consumer Confidence Index surged to a 16-year high.
It’s a long-standing adage in Washington that the federal debt is a problem only when the other party is in charge. Republicans label Democrats as the party of “tax and spend,” while Republicans are deemed the party of “borrow and spend.”
Nonfarm payrolls were reported to have risen by “just” 98,000 in March, while the unemployment rate fell to its lowest level (4.5%) since May 2007. The March 14-15 FOMC minutes “revealed” that officials plan to begin reducing the size of the Fed’s balance sheet later this year.
Upcoming data reports will help to fill in the near-term picture of the economy, while developments in Washington will lead to a reassessment of the intermediate outlook.