February 11, 2020

Small business optimism climbed 1.6 points in January to 104.3 after having declined 2.0 points in December.  The August 2018  level of 108.8  broke the previous record high level of 108.0 set 35 years ago back in July 1983.  The current level of confidence is below that record but remains at a lofty level..

Chief Economist William Dunkelberg said, “2020 is off to an explosive start for the small business economy, with owners expecting increased sales, earnings, and higher wages for employees. Small businesses continue to build on the solid foundation of supportive federal tax policies and a de-regulatory environment that allows owners to put an increased focus on operating and growing their businesses.”

In our opinion the economy is expected to expand at an acceptable 2.4% pace  in 2020.  Specifically, we believe that the cut in the corporate income tax rate, legislation that will continue to allow firms to repatriate corporate earnings currently locked overseas back to the U.S. at a favorable 15.5% rate, and the steady elimination of unnecessary, confusing and overlapping federal regulations will boost investment.  That, in turn, has, in our opinion, already boosted our economic speed limit from 1.8% to 2.2% with the prospect of climbing 2.5% within a few years as 5G further boosts growth in productivity.

The stock market is at a record high level..   Jobs are being created at a brisk pace.  The unemployment rate is well below the full employment threshold.  Mortgage rates have fallen this year from 4.9% to 3.7%.  And investment spending is climbing at a moderate pace.  We expect GDP growth to be 2.4% in 2020.  The core inflation should edge upwards to 2.3% in 2019 to 2.7% in 2020.  The Fed   should keep the funds rate at a very low level of 1.6% through the end of next year..  Moderate GDP growth, low inflation, and low interest rates should continue to bolster the stock market in the months ahead.

Stephen Slifer


Charleston, SC