Ten Reasons for Optimism
Author: Greg Valliere
December 8, 2022
BUT THIS WOULD BE THE ODDEST RECESSION in decades, with unemployment at 3.7% and plenty of Washington money still to be spent. Moreover, there are plenty of reasons for optimism — let’s look at ten this morning:
1. UKRANIAN TROOPS CONTINUE TO ADVANCE, perhaps not as quickly as their stunning counter-offensive in September, but make no mistake — Russia, humiliated, is still losing this war. And there’s a glimmer of hope that serious negotiations could begin this spring, after Ukrainians show the world that a cold dark winter will not break them.
2. CHINESE PRESIDENT XI JINPING is in no rush to invade Taiwan, and he wisely has toned down Zero Covid policies. In many respects, he’s a pragmatist, focused on trade and improving China’s economy.
3. U.S. ELECTIONS THIS FALL went smoothly — few allegations of voter fraud, and the political temperature seems to be lower in the U.S. Fears of American unrest have subsided.
4. MARKET-UNFRIENDLY POLICIES are have little chance of passage in the new Congress — no big tax hikes or ambitious new spending plans, as the Progressive Agenda collides with the right-wing House.
5. INFLATION HAS PEAKED, as energy prices fall and the economy begins to soften. Will the Fed get inflation down to 2%? That’s unlikely any time soon, but the direction is downward despite the hot labor market.
6. WHETHER YOU LIKE HIS POLICIES OR NOT, the country seems relieved that Joe Biden has had a decent year — lots of legislative accomplishments, and he has unified NATO on Ukraine. Sources insist that Biden has not made a decision on running again; we have believed that he won’t but that’s now a much closer call.
7. THE POLITICIANS WANT TO MOVE ON IMMIGRATION: The labor shortage is a huge drag on economic growth, and a more liberal immigration policy is warranted, as we wrote earlier this week. An immigration reform bill could pass — if not this month, then at some point in 2023.
8. THE BUDGET DEFICIT IS PLUNGING, down from about $3 trillion two years ago to around $1 trillion now — still high, but the fixed income markets aren’t worried, as a more restrictive spending mood emerges in the new Congress (except for defense outlays).
9. WASHINGTON GOT A WAKE-UP CALL ON ENERGY THIS YEAR: Renewables may be the wave of the future, but not yet. Even many Democrats concede that this is not just about drilling and exploration; it’s also about transporting fuel through pipelines and then refining it. The U.S. and Canada have loads of fossil fuels, which will continue to play a major role.
10. IT’S BEEN RAINING EVERY FEW DAYS IN CALIFORNIA, with more coming this weekend. The worst drought in modern U.S. history isn’t over, but at least it isn’t getting worse.
TO BE SURE, THERE ARE PLENTY OF ISSUES to worry about: Iran’s terrorism, a possible over-reaction on interest rates from the Federal Reserve, a disturbing new flu and other viruses, the under-reported trade friction between the U.S. and allies, etc. But there are plenty of reasons for optimism — at least ten.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
For further information, please visit AGF.com.
©2023 AGF Management Limited. All rights reserved.