There has been chatter about whether the Tax Cuts and Jobs Act of 2017 (TCJA) will result in a temporary stimulus, or sugar high, to U.S. economic activity because of the increase in corporate after-tax profits and the increase in household disposable income that will flow from the tax-rate cuts.
In each of the first three quarters of 2017, there have been double-digit year-over-year percentage increases in the quarterly average level of the S&P 500 stock-price index – 19.3% in Q1, 15.5% in Q2 and 14.2% in Q3.
The Fed is dazed and confused (with apologies to Jake Holmes) about the lack of goods/services price inflation currently present in the U.S. economy. No matter how you slice or dice the Personal Consumption Expenditures (PCE) Chain Price Index, its annualized growth has not trended above 2% since 2011.
As a result of some Fed actions taken in 1936 and 1937, the U.S. economy, after experiencing a robust economic recovery starting in early 1934, slipped back into a recession midyear 1937, which lasted through midyear 1938.