Salient to Investors:
A strengthening economy will boost the president’s second term.The easy-money policy of the past four years is likely to continue throughout Obama’s second term.
Job growth will increase tax revenue and help shrink the budget deficit while keeping taxes low and preserving essential spending – all without any magic from the President. Banks have stronger balance sheets, most household debt is back to normal through a frugality and default. Housing prices have gone from falling to rising, buoying confidence, with pent-up demand for residential and commercial construction. Increased consumer spending induces business investment in a virtuous circle.
Most economists say the influence of any president over an almost $16 trillion economy is smaller than commonly believed. Robert Shapiro at Sonecon said knowing who’s going to be president takes you only about 10 percent of the way. Austan Goolsbee said almost all of the economy has nothing to do with the government.
Harm Bandholz at UniCredit said the economy needs less support from the government in the coming four years than in the past four.
Mark Zandi at Moody’s Analytics said the economy is operating well below potential, and there’s a lot of room for growth. Zandi said upper-income households’ balance sheets are as pristine as they’ve ever been, though mortgage debt remains a heavy burden at lower-income levels. Obama’s fiscal policy was critical to avoiding a depression.
Blue Chip Economic Indicators says the average forecast of economists is for growth of 3 percent a year in 2014, 2015 and 2016, with the unemployment rate sinking over the period from 7.4 percent to 6.9 percent to 6.5 percent but not going below 6 percent until 2019.
Ben Herzon at Macroeconomic Advisers said self-correcting forces in the economy will prevail.
The CBO says that even if the Bush tax cuts are extended in full, federal revenue will soar by 2016.
John Silvia at Wells Fargo Securities said job growth will be constrained by globalization as US companies continue to satisfy growing foreign demand by building factories abroad.