How Will Political Gridlock Affect the Economy?

Consumer and business confidence soared after the presidential election because of the belief that President Trump’s policies on spending, tax cuts, health care and regulatory reform would give the economy a boost. So, what will be the impact on the economy if political gridlock prevents or delays Trump from delivering what he promised?

For starters, let’s assume a government shutdown is avoided. Congress will need to pass a bill known as a continuing resolution by April 28 in order to keep federal agencies funded and operating. If they fail, the reduction in federal spending would ding second-quarter growth and inhibit the economy’s ability to recover from a weak first quarter. Continue reading “How Will Political Gridlock Affect the Economy?”

Highlights From “How Your Business Will be Affected by the Trump Administration”

In case you missed our recent webinar discussing how the incoming Trump administration will affect businesses, here are some detailed highlights of the discussion, which covered everything from the future of Obamacare to taxes and environmental regulations.

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Even Without Tax Cuts, Consumers Will Boost Economy

Consumers will shoulder the burden of keeping the economy on track in 2017 while waiting for Donald Trump’s tax cuts to be passed. Low unemployment, job and wage growth will keep money in consumers’ pockets, while the rise in the stock market since the election will provide a bit of an extra bump up to spending.

Consumer spending should rise by about 2.8% in 2017, up from 2.6% in 2016. 2017 will be the fourth straight year that consumer spending growth will have been markedly higher than overall GDP growth, indicating how much this spending is carrying the economy. Continue reading “Even Without Tax Cuts, Consumers Will Boost Economy”

Coming: GOP Infighting over Federal Spending

It’s a good bet that federal spending and the annual budget deficits will increase during the Trump administration, despite opposition from many members of his own party who will hold firm on reining in government outlays.

But the Republican-controlled Congress isn’t about to give President-elect Donald Trump a blank check. The credit rating service Moody’s forecasts that if he were to get everything on his spending wish list, the deficit as a share of GDP would likely top 10% by the end of his four-year term, compared with 3% now. That’s not going to happen.

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How Will the Presidential Election Affect the Housing Market?

If Democrats hold on to the White House, will that help the price of your home? Or would the housing market fare better with a Republican victory? The fact is, it won’t matter much which party wins the White House in November — at least not when it comes to housing prices.

A study of real estate in California going back to 1980, found that housing prices rose by as much as 6% in the year before an election and about 5% in the year after an election, but only 4.5% during election years. A possible explanation for the slower price growth is that presidential elections create uncertainty, making people less likely to take chances on large purchases, thus slowing down the rate of increase in home values.

The California Association of Realtors has looked at home prices in the state dating back to 1990 and found that elections historically have had little or no negative impact on the California housing market. It did find that house prices rose slightly faster in the last months of the last five presidential elections.

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How the Next Fed Rate Hike Will Affect You

We expect the Federal Reserve to raise its federal funds interest rate from 0.25% to 0.5% at its meeting on December 14. This will have a domino effect, boosting some loan and deposit rates for consumers, but not all of them.

How the Fed Rate Hike Will Affect Your Loan Rates

When the Fed raises, the bank prime rate will immediately jump by the same quarter percentage point. Interest rates on home equity lines of credit will also rise by the same amount, to a minimum of 3.75%. Auto and personal loan rates should rise, too. In fact, auto lenders may nudge their rates up a tick more in the months to come as delinquencies on subprime auto loans creep up.

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Billions’ Worth of Merchandise Stranded at Sea

The collapse of one of the world’s largest ocean carriers has marooned more than half a million cargo containers in international waters. As much as $14 billion worth of cargo is stuck in limbo awaiting the fate of bankrupt Hanjin Shipping, with dozens of vessels anchored offshore filled with toys, shoes, computers, couches, dishwashers, etc. Port operators and cargo handlers refuse to unload the ships until they are paid.

Hanjin’s global creditors have impounded at least eight vessels, and about 80 are still at sea until captains are assured ships and cargo won’t be seized. It isn’t clear whether Hanjin’s parent company will be able to secure the $90 million it pledged to ease the carrier’s financial woes, or whether that will be enough to dent Hanjin’s $5.5-billion debt. The company has resorted to selling off ships from its 149-vessel fleet, after signs that the South Korean government won’t bail out its largest ocean carrier.

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Trade Deficit Increases in Listless World Economy

Widening 4% in ’16, after a 6.2% increase in ’15

Weak global growth combined with a relatively strong U.S. dollar will drive the U.S. trade deficit up 4% this year, as American exporters struggle to stay competitive in key trading nations. The drag on exports is likely to continue into next year. Continue reading “Trade Deficit Increases in Listless World Economy”

Consumers Rev Up Spending

4% growth in ’16, compared with 4.8% in ’15 (excluding gas)

Feeling more confident about the economy, the job market and their own financial stability, shoppers dialed up spending in June. The third consecutive month of gains marks a strong end to the second quarter of 2016, though challenges remain as retailers grapple with changing industry trends—more online shopping, free shipping demands, etc. Continue reading “Consumers Rev Up Spending”