And the markets are at All Time Highs, cognitive dissonance? I thought markets were reflective of jobs and economy. Our trade deficit is at a 16y low - maybe good but probably bad?
There is a historical conceit that the Dow Jones was a reliable economic barometer, a presumption that seems tied to the nostrum that the Great Depression began with the 1929 Stock Market Crash (a narrative which, like so many historical narratives, is an egregious oversimplification to the point of being functionally false).
However, there has been a functional shift in market dynamics since the Great Financial Crisis and the introduction of Quantitative Easing post-2008.
Prior to the GFC, there was a broad correlation between consumer price inflation and the M1 money supply. The stock market indices rose and fell largely independent of the money supply.
In the wake of the GFC, however, a considerable amount of stock market growth can be attributed solely to growth in the money supply.
So influential has money supply growth been on the stock markets that virtually all the rise in both the Dow and the S&P 500 during the Obama years can be written off as asset price inflation, and if one removes the effect of money supply growth from the major indices, the markets would have FALLEN during those years.
While some semblance of market sanity returned during the first Trump term, market melt-ups during the Biden Reign of Error were all too common.
As a result, we should not give much, if any, credence to stock market movements as an economic bellwether. Markets can give us insight into what is happening today, but they are at present less reliable when evaluating the economy over longer periods of time.
I tend to focus less on GDP percentages and more on jobs. GDP is a problematic figure on a good day, made even more so by the fact that roughly 20% of GDP is government spending (me personally, no government spending should be included in GDP).
Given that China routinely posts 4.5-5.5% GDP growth and somehow still manages to grapple with deflation is, in my view, reason enough to not put much faith if any in GDP numbers.
An economy is doing well if people are being put to work. If we're not putting people to work how is the economy doing well? GDP growth without job growth sounds an awful lot like mismatched priorities and perverse incentives to me.
The Trump administration has a theory of what needs to be done to make America a manufacturing superpower again. So far, not a success. Peter, is there enough data now for any analyst to make a call on the plan’s ultimate success? Is it a case of, “not successful theory” or “not successful yet”?
Or maybe there has not been enough data or time for anyone to make this call, and those who do are fools?
And the markets are at All Time Highs, cognitive dissonance? I thought markets were reflective of jobs and economy. Our trade deficit is at a 16y low - maybe good but probably bad?
There is a historical conceit that the Dow Jones was a reliable economic barometer, a presumption that seems tied to the nostrum that the Great Depression began with the 1929 Stock Market Crash (a narrative which, like so many historical narratives, is an egregious oversimplification to the point of being functionally false).
However, there has been a functional shift in market dynamics since the Great Financial Crisis and the introduction of Quantitative Easing post-2008.
Prior to the GFC, there was a broad correlation between consumer price inflation and the M1 money supply. The stock market indices rose and fell largely independent of the money supply.
In the wake of the GFC, however, a considerable amount of stock market growth can be attributed solely to growth in the money supply.
https://newsletter.allfactsmatter.us/p/falling-down-the-rabbit-hole
So influential has money supply growth been on the stock markets that virtually all the rise in both the Dow and the S&P 500 during the Obama years can be written off as asset price inflation, and if one removes the effect of money supply growth from the major indices, the markets would have FALLEN during those years.
While some semblance of market sanity returned during the first Trump term, market melt-ups during the Biden Reign of Error were all too common.
As a result, we should not give much, if any, credence to stock market movements as an economic bellwether. Markets can give us insight into what is happening today, but they are at present less reliable when evaluating the economy over longer periods of time.
Also with GDP growth projected at 5+%, that aligns with my point 2 above.
I tend to focus less on GDP percentages and more on jobs. GDP is a problematic figure on a good day, made even more so by the fact that roughly 20% of GDP is government spending (me personally, no government spending should be included in GDP).
Given that China routinely posts 4.5-5.5% GDP growth and somehow still manages to grapple with deflation is, in my view, reason enough to not put much faith if any in GDP numbers.
An economy is doing well if people are being put to work. If we're not putting people to work how is the economy doing well? GDP growth without job growth sounds an awful lot like mismatched priorities and perverse incentives to me.
Couple of thoughts
1. I hear that the household survey showed 200,000 jobs created.
2. Also, labor productivity up to 4.9% may imply business growth without hiring
What do you think?
My deep dive on the Employment Situation Summary for December will be out on Monday.
I will have thoughts on these points, but until I write that up I won't know what they are!
The Trump administration has a theory of what needs to be done to make America a manufacturing superpower again. So far, not a success. Peter, is there enough data now for any analyst to make a call on the plan’s ultimate success? Is it a case of, “not successful theory” or “not successful yet”?
Or maybe there has not been enough data or time for anyone to make this call, and those who do are fools?
Economic plans are never successful until they are.
Is a course correction warranted? I'm inclined to think so. Scott Bessent presumably disagrees.
Time will tell which assessment is correct.