You will all be rich
If you believed Donald Trump’s claim that we’d all become rich under his presidency, you’re in for some sobering economic reality. In the first year, after the Republican supercharged the economy with a big tax cut, it all looked good. The stock market rose by 31.5 percent (see Macrotrends for a cool interactive graphic shown in part below) in 2017 and unemployment fell to 4.1 percent (BLS).
no Economic “free lunch”
But the stimulus of the tax cut has now faded. The Federal Reserve has been raising interest rates to try to keep the economy from “overheating” and putting pressure on prices. In addition, Trump (self-named “Tariff man”) has been engaging in a trade war. He seems to believe that the tariffs we impose are borne by foreigners when, if fact, they are paid for by the American consumer (see Tariffs) and are equivalent to tax.
The second year of the Trump presidency started out well but ended with a thunk. The stock market is coming off the worst December since the great depression. For the year, the Dow fell 5.6 percent and the S&P was down 6.2 percent (CNN).
Economic weather alert
The stock market has long been considered a leading indicator of future economic performance. The drop in the stock market at the end of 2018 has led financial investment companies such as Charles Schwab to forecast darker times ahead. For their global forecast, they wrote:
“Global growth may slow in 2019 as the economic cycle nears a peak, with increasing drag from worsening financial conditions combining with full employment and rising prices. Global stock markets may peak in 2019 if leading indicators signal the gathering clouds of a global recession.
If we borrow the severe weather scale for storms and apply it to the global economy and markets, we aren’t forecasting “Recession Warning,” meaning a recession is here or imminent. A better term is “Recession Watch,” in which conditions are favorable to a recession if a number of risk factors (e.g., trade, interest rates, inflation) deteriorate.” (Charles Schwab)
Trump does not have coherent long-term economic policy. Instead, his economic actions have been drive by an anti-tax ideology. This is combined with an inability to make hard (and possibility), unpopular decisions on spending. The result is a ballooning deficit. Ultimately, it is a house of cards that looks good for a while but will not bring lasting prosperity.
I’m missing something with this post. Your opening points are fautless, but sadly it’s dangerous to count upon what others may believe. Please add some more detail, because I find you to be an informative author and I want to learn more from you!
The stock market is an expected leading indicator of future economic trends. Over the 100 years or so, most major drops in the stock market have been followed by an economic downturn. Although the stock market is not a direct driver of the economy, it does reflect people’s expectations which are important drivers if spending. It also reflects our level of wealth (value of assets). When wealth declines people pull back on spending. The last reason I believe the economy is headed for a downturn is we are currently in the longest expansion ever and the business cycle always kicks in eventually.
As to why i quote others, although I am an economist, my area of specialization is not macroecomics. In contrast, the investment management companies have economic forecasting models they use to guide the investment advise they provide.