We are just days away from the New Year and the swearing in of Donald Trump as the 45th President. For many, this is the scariest of occasions. They are still trying to steady themselves for a bad 4 year New Year's Eve hangover. For those sad souls, New Year's hopes are pinned on impeachment. (Haven't we seen that before.)
While some feel like they are watching their worst political nightmare happen before their very eyes, others including me see a brighter potential future. Must so many Americans be so disssppointed, one way or the other? Can America have it both ways?
Evidently we can have our un-merry political disappoints and prosperous New Year too. Don't take it from me. I offer the following proof from the recent post election Consumer Sentiment Survey:
Quote from The University of Michigan Preliminary Consumer Sentiment for December-
"Consumer confidence surged in early December to just one-tenth of an Index point below the 2015 peak—which was the highest level since the start of 2004. The surge was largely due to consumers’ initial reactions to Trump’s surprise victory. When asked what news they had heard of recent economic developments, more consumers spontaneously mentioned the expected positive impact of new economic policies than ever before recorded in the long history of the surveys.
[To put these results into the larger historical context since its beginning in 1978, consumer sentiment is approx. 15% above its historic mean. ]
How much does consumer sentiment matter? On the one hand, the common perception is that the “Consumer spending accounts for 70 percent of the economy.” On the other hand, experts point out that consumer spending is the effect, not the cause, of a productive healthy economy. The Hands have it!
It is easy to argue that consumer spending is not the mainstay of the USA economy, and that "investment" is. Business spending on capital goods, new technology, entrepreneurship, and productivity is more significant than consumer spending in sustaining the economy and a higher standard of living.
Enrepreneurial formation and activity drive the economy! And these rely on the availabilty of capital, productivity, and technological advances. This principle was discovered and developed by the brilliant French economist Jean-Baptiste Say in the early nineteenth century and is known as Say’s Law. In fact, Jean-Baptiste created the word “entrepreneur” to describe the primary catalyst of economic performance.
Clearly, things are clearer since the election. For better or worse, at least we all, with the exception of Jill Stein, now know who the next President will be. That alone is HUGGGEEE! (Sorry, had to say it.)
But here is something we all should be able to agree on. Trump is a very a "pro-business" and "pro-American jobs" President. Markets, businesses and investors, expect lower and more simplified taxes, large investments in infrastructure, reduced regulation, and improved (re-negotiated) trade terms. Prospects for new Intitial Public Offerings ( IPO) are looking up, which will raise important capital for business expansion while simultaneously freeing up venture capital for new rounds of investment. Thus compounding growth and innovation.
The economy is also going to get a lot of help from its friends ... queue upbeat music.
Advances in technology, such as Artificial Inteligence, transportation with self-driving and drones, and new business models such as AirB&B and the "Gig-economy" with the likes of Uber, are all reshaping opportunties for entreprenuers and increasing American productivity and competiveness.
Expansion in USA capital markets will benefit further from the massive impact of the energy revolution taking place in America. Moving from energy dependence to energy independence will have large and profoundly positive effects on the American economy and trade deficit. And, if President Trump reverses the negative trend for American manufacturing to a positive direction, in combination with this energy revolution, we have got quite a one-two set of positive economic forces on our hands. The Hands have it again!
Frankly, I've only scratched the surface of all the positive potential of forces. No room to expand on the benefits of world synchronized monetary easing, pent up demand and replacement cycles, new household formation, and other major forces at hand. Surfice to say, I believe a giant economic spring has sprung. And, if I'm right, there will be a lot more blooming this spring than flowers!
All this lifts demand for USA goods and services. Which leads to business investment and bank lending. Which leads to improvement in wages. Which leads to a rise in consumer sentiment. Which leads to consumer spending. Which takes us back to the begining. Such is the great spirals that both expansions and recessions are made of.
Gone are the yesteryears of slow growth. Gone are the yesterdays of election uncertainty. Things are shaping up to be a very prosperous New Year. Beyond that, between black swans and chaos, nobody really knows.
Unfortunately, from a political standpoint, a bit more than half of Americans drank from the HRC & Obama punch bowl, and they look to be waking up with a miserable political hangover when President Trump is sworn. A real bad banger. This too shall pass. Whether it be in 2017, or four more years is what remains to be seen. Fortunately, that is up to you, and whether your New Year's glass is half empty or half full.
