Even as all eyes are on the upcoming tax reform, income gains and confidence in the economic outlook has prompted Americans to open their wallets this holiday season. Buoyant financial markets, modest inflation and low unemployment have all been major contributors as well.
Despite the assault of Amazon on brick and mortar retail stores, Walmart, Nordstrom, Kohl’s, Costco and Target all witnessed large year over year increases in November during the Thanksgiving Holidays.
The impressive start to the holiday season suggests that US is on track for a strong Q4 and could boost the economic growth rate for the year, which currently stands at 2.8%. After the release of retail data earlier this week, Bank of Atlanta revised its annual growth rate projection to 3.3%.
With the upcoming tax reform set to put more discretionary money in consumer’s pockets, even after a stellar year in the stock market, 2018 is shaping up to be another strong year, according to economists.
Future Wealth’s View
It has been a strange year for sure – Most unlikely US President ever to take office, continued spate of mass shootings, highly subdued Fed, prospect of Nuclear war, destabilization of governments and currencies in Europe, the VIX consistently below 10, flattening of the yeild curve etc. But, through it all, markets have continued their climb to new highs focusing simply on strong fundamental economic data and looking past all the other noise. What a novel idea!
And so, as we end 2017 and begin to look to the next year, few things that deserve attention but have been largely been ignored may rear their ugly heads and could derail this historic stock market rally.
Global Growth – While all the attention has been on the US, last week’s economic data from China and Japan, as well as favorable indicators from Europe suggest that global growth continues to gain momentum. This would be a key indicator for continued stability in the stock market next year.
Productivity Growth – Productivity growth in the US has declined sharply since 2004 and there is no consensus among economists attempting to explain this drop. The answer to this puzzle holds the key to future prosperity as the US economy depends on productivity improvements for long-term economic growth.
Policy Advances. Even as the U.S. Congress is on the verge of passing a tax bill, a pro-growth infrastructure plan would have to be the next pillar to be constructed in order to sustain the high valuations in the stock market.
As we come to the end of 2017, let us remind ourselves that history rarely repeats itself. But, some things will stay the same – that human beings will always behave like a flock of sheep until they get slaughtered with the rest of the herd.