Opinion: 6 things all investors should be thankful for
Three years ago, I gave thanks for how cheap oil was pulverizing Vladimir Putin, the Organization of the Petroleum Exporting Countries and other global turkeys. This year, Americans and investors have at least as many reasons to be thankful, transcending the poisoned U.S. politics we’ll all — ahem — carefully avoid at Thanksgiving dinner.
Let’s count ‘em up. Number six is the one that counts most.
1. We have a really solid world economy
After China’s mini-financial panic of 2015-16, which shaved U.S. exports to Asia and with it U.S. growth and stock prices, the opposite is happening now. Global growth forecasts are improving, and Bank of America Merrill Lynch, at least, thinks emerging-market stocks are still cheap because the economies there have room to grow. Healthy trading partners are good for the U.S., whether a president who portrays trade as a zero-sum game understands that or not.
2. Unemployment near a 17-year low and middle-class real incomes at a record
October’s 4.1% unemployment rate is the same as in the giddy peaks of 1999. Even better, median household income, adjusted for inflation, has surpassed its old dot-com peak.
Best of all, this is happening in a low-inflation economy with no bubbles worth worrying about. There’s plenty of manufacturing capacity available, housing affordability is fine in most places, and nearly stable over the last year. Housing prices are up 4%, but incomes are up 3%, according to the National Association of Realtors.
That means we can continue for a good while with slowly declining unemployment and rising real wages, before some bubble or rot derails the expansion. If recent improvement in business investment helps productivity growth, that will sustain good times even longer. If President Donald Trump’s corporate-tax cut bill helps investment — dubious, not least because it’s unlikely to pass — all the better.
Let trolls claim Trump accomplished this without actually passing any economic policy, by spreading the goodwill and confidence whenever he calls nuclear-armed North Korean dictator Kim Jong Un fat on Twitter. As long as the troll who’s your uncle passes the stuffing.
3. Low interest rates mean high purchasing power
The percentage of folks’ income that goes to monthly debt service (including the student loans your millennial nephews caterwaul about) is the lowest in the 35 years that data have been kept, Moody’s Analytics chief economist Mark Zandi says.
Simple: When the interest rate on your mortgage is 3% and change, your car loan is free or close to it, and even credit cards are cheap, you can afford more. That’s a good thing. Especially when you’re also richer because of rising stock prices, and low inflation suggests interest rates will rise only slowly.
4. Oil’s still cheap.
Crude CLF8 isn’t as cheap as it was, but still saving the ordinary household hundreds of dollars a year compared with when it was $100 a barrel. It’s also expensive enough now to stabilize the energy companies, which is useful in the short term. Over time, as electric cars take over the market, they’ll have problems, but we can deal with those when the time comes.
5. Our family still loves us (and doesn’t give a fig about bitcoin)
Shawn Langlois’ piece about what to say to relatives who ask about bitcoin BTCUSD, rather than starting a fight, is worth reading if you missed it.
Here’s my answer: “Now, now, that holiday where we all pretend to believe in something even 12-year olds know is bogus is next month.” Then, drink. And pour them a bigger one.
If this spoiled your child’s Christmas, two observations:
And, congratulations: If your kids are reading MarketWatch that young, they’re well on their way to prosperity!
If you believed in Santa yourself until just now, let me sell you bitcoin from my (imaginary) private stash. Great stocking stuffer!
6. Markets still work — including, especially, the marketplace of ideas
From the day after Donald Trump’s inaugural address, we’ve seen the power of simple insistence on truth. It began with journalists laughing former Trump spokesman Sean Spicer pretty much out of town upon his yammering that Trump’s inaugural crowd was yuuge when we’d all seen the pictures.
In the months since, the power of truth has saved us from disastrous policies based on fictions, and (more importantly) begun to restore the centrality of facts and evidence in public life Trump disdains.
Persistent deconstruction of Trump’s health-care bill destroyed it, and changed public opinion on universal or near-universal health care, probably forever.
Now the same thing is happening on taxes, with advocates and journalists each, separately, documenting how the GOP proposals would be less a tax cut than a redistribution of tax burden — to the coasts, and to the upper middle class, as red states and very wealthy people pay less. And the bill is increasingly unpopular as citizens figure it out.
RIP supply-side economics, 1978-2018? Maybe. A small-d democratic revival, for sure. And that’s way more important.
Spicer’s replacement, Sarah Sanders, took grief this week for forcing reporters to say what they were thankful for before she would answer their questions, but it’s an easy question.
I’m thankful for the good sense of the American people, free speech and free markets, all of which always restore balance in the end.