While the political machinations are sometimes like a drunken family episode, the economic landscape is an entirely different story…
- While the political machinations are sometimes like a drunken family episode, the economic landscape is an entirely different story.
We all have that uncle, cousin or sister-in-law who during the holidays drinks too much Jack Daniels before she arrives to family festivities. She keeps slugging it down before pulling off some shenanigans that threaten to make a mess of things.
But we all have tricks up our sleeves to manage Uncle Fred’s antics so we can still enjoy the holiday spirit together.
Today’s economic political climate is no different.
While the political machinations are sometimes like a drunken family episode, the economic landscape is an entirely different story.
Despite the D.C. fist fighting, the economy is on fire, and more and more people and businesses are beginning to reap the benefits.
I am an unapologetic bull about the U.S. economy. I shut out the political righties who are opportunistically taking credit for it, and I ignore the political lefties who say it is a bubble or that the recovery is uneven (it is, but there are still many benefits).
This is one thing going well in the world, that we can revel in. And it has less to do with politics and more to do with a global economic correction that we should all appreciate after a 10-year economic slump that was downright nasty.
Legendary bond trader Mohamed A. El-Erian dubbed it a “synchronized global recovery”. He points to positive economic news from China, Japan, Europe and the U.S. with “all four major economic regions now contributing directly to the improved prospects for global growth.”
Look at the fundamentals. In the United States, job growth is at a 10-year high and unemployment is at a 17-year low. Companies are flush with liquidity and are investing again, and wage pressure is on the rise as businesses must pay more for labor because of low unemployment. The bull run on Wall St. is interesting, but that is not what I am talking about here.
Yes, things are still uneven and far from perfect, but the basics are sound. And that is good news for the housing market.
She said, “Information received since the Federal Open Market Committee met in November indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Averaging through hurricane-related fluctuations, job gains have been solid, and the unemployment rate declined further.”
Tax reform will only accelerate investment. That is all I am going to say on that hot-button issue.
A lot of this stuff is simpler than we make it out to be. Consider the housing market.
For real estate, yes the economic consequences are double sided. Demand for housing will accelerate and prices and rents will rise. More young people who are doubling up or living with their parents will rent apartments, and more homebuyers will have the economic confidence to buy homes. The rich who are already benefiting will be further bullish with tax reform and buy more property.
A sustainable economic recovery will help rub out some of the uncertainty caused by the shrill political noise.
While wage pressure is certainly happening, it will not be strong enough to overcome rising house prices in some expensive urban markets.
Barring an unprecedented terrorist attack, calamitous war, catastrophic natural disaster, or divisive impeachment hearings that further muck up an already murky political climate, the economy should continue to grow. And even those events may not stop the festivities.
There you go. Lots of holiday gifts this year, but with the prospect that Aunt Frieda will drink too much vodka, fall and spill the mushroom gravy all over the new Moroccan rug.
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