November 12, 2019

.Small business optimism rose 0.6 point in October to 102.4 after having fallen 1.5 points in September.  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..

NFIB President and CEO Juanita Duggan said, “A continued focus on a recession by policymakers, talking heads, and the media clearly caused some consternation among small businesses in previous months, but after shifting their focus to other topics, it’s become clear that owners are not experiencing the predicted turmoil.  Small business owners are continuing to create jobs, raise wages, and grow their businesses, thanks to tax cuts and deregulation, and nothing is stopping them except for finding qualified workers.”

Chief Economist William Dunkelberg said, ““Labor shortages are impacting investment adversely – a new truck, or tractor, or crane is of no value if operators cannot be hired to operate them.  The economy will likely remain steady at its current level of activity for the next 12 months as Congress will be focused on other matters, and an election cycle will limit action.”

In our opinion the economy is expected to expand at an acceptable 2.4% pace this year and in 2020.  Specifically, we believe that the cut in the corporate income tax rate, legislation that will 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, should boost our economic speed limit should from 1.8% or so today to 2.5% within a few years.

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 in the past couple of months from 4.9% to 3.7%.  And investment spending is climbing at a moderate pace.  We expect GDP growth to be 2.4% this year and in 2020.  The core inflation should edge upwards to 2.4% in 2019 and 2.8% 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