The outlook for US growth in the fourth quarter is still muted vs. Q3’s pace, according to recent updates from various sources. The strong 3.2% increase in Q3 is expected to decelerate to around 2% and hold at that pace in Q1 2017, picking up slightly as the new year unfolds.
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A modestly positive economic trend held US recession risk at a low level through November. Although recent updates revealed some unexpected weakness in last month’s activity (retail sales and industrial production), the broad macro profile continues to reflect a growth bias that appears set to continue in the near term.
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Sellers took no prisoners in last week’s trading, leaving all the major asset classes lower after the five trading days through Dec. 16, based on a set of proxy ETFs. The all-inclusive declines mark the first time since March that red ink spared no corner of broadly defined global markets for the weekly accounting.
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● The Activist Director: Lessons from the Boardroom and the Future of the Corporation
By Ira M. Millstein
Summary via publisher (Columbia University Press)
Some of the worst corporate meltdowns over the past sixty years can be traced to passive directors who favored operational shortcuts over quality growth strategies. Thinking primarily about placating institutional investors, selective stockholders, proxy advisors, and corporate management, these inattentive and deferential board members have relied on short-term share price increases to sustain their companies long term. Driven by a desire for prosperity, not posterity, these actions can doom any company.
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The day after the Federal Reserve lifted interest rates, the benchmark 10-year Treasury vaulted to a new two-year-plus high of 2.60% on Thursday (Dec. 15), based on daily data from Treasury.gov. The latest surge widens the gap between the current yield and the record low of 1.37% that was touched just five months earlier, on July 8.
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The Federal Reserve announced an increase in interest rates yesterday, nudging its target rate up by 25 basis points to a 0.50%-to-0.75% range. The central bank’s revised economic projections were slightly more hawkish too. Meantime, the government yesterday reported weaker-than-expected numbers for retail sales and industrial production in November, fueling debate about the wisdom of tightening monetary policy.
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The Federal Reserve is expected to raise interest rates today to a 0.50%-to-0.75% range, according to the consensus forecast of analysts via Econoday.com. There’s always room for a surprise, of course, but the telltale signs look compelling for projecting that the central bank will lift its policy rate in today’s monetary announcement at 2:00 pm eastern. Here’s a quick recap of how some of the evidence stacks up according to several market-based indicators.
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Donald Trump’s election victory last month has persuaded Mr. Market that US economic growth is destined to accelerate. The reasoning for the recent surge in the equity market: a pro-growth agenda is expected for 2017 and beyond, courtesy of a policy mix of corporate tax cuts, reducing regulation, and increases in infrastructure spending. Yet economic forecasts at the moment are calling for a relatively modest pace for the US macro trend in the near term. In fact, a number of GDP estimates point to a slower rate of growth following the 3.2% rise in GDP in this year’s third quarter. That could change, of course, once a Trump administration is running the show in the new year. At the moment, however, economic projections from various sources have yet to confirm the stock market’s recent burst of optimism.
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Real estate investment trusts (REITs) in the US shot up last week, posting the biggest gain among the major asset classes, based on a set of proxy ETFs. The gain marks the strongest weekly advance for the sector since September.
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● Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer
By Dean Baker
Summary via publisher (Center for Economic and Policy Research)
There has been an enormous upward redistribution of income in the United States in the last four decades. In his most recent book, Baker shows that this upward redistribution was not the result of globalization and the natural workings of the market. Rather it was the result of conscious policies that were designed to put downward pressure on the wages of ordinary workers while protecting and enhancing the incomes of those at the top. Baker explains how rules on trade, patents, copyrights, corporate governance, and macroeconomic policy were rigged to make income flow upward.
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