January 28, 2020
Don’t look now, but it is coming. We constantly warn that predictions are often fruitless. But one thing is guaranteed, we will have a Presidential election this year. While we can give you the date, we obviously can’t guarantee the winner. Though we can’t guarantee who will say what, we can guarantee that there will be plenty of mud swung back and forth. What is interesting to us is, how the election might affect the markets and the economy. We are not asking how the winner will affect the economy. At this juncture, we are asking how the process might affect the economy.
For one thing, this election is likely to create a lot of spending, especially in swing states. From advertising to hotel rooms, there could be a boost in at least some economies. On the other hand, if there is too much mud slung around, the mood of the consumer could sour. The good news is that many consumers, who are also voters, may become numb to the entire process. Many may just ignore what is happening, except to vote. Above all, we hope everyone will vote.
It is important that we monitor the influence of the electoral process on the economy, because, as we have seen, the economy has indeed slowed down coming into 2020. The GDP for the fourth quarter is just about to be released and we are expecting that the economy grew at an approximate 2.25% rate in 2019, down close to 0.5% the year before. There will be two future revisions to this quarterly number, but the revisions are not likely to change the annual growth numbers by that much. Perhaps we could use some economic stimuli from both parties throwing some money around. Certainly, this is one reason why the Fed is likely to keep rates at today’s low levels again when they meet this week as well.
Source: Origination Pro
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