Three Major Implications of the Jobs Report; Trendy New Idea — Modern Monetary Theory; Joe Biden, Dinosaur
Author: Greg Valliere
April 8, 2019
A VERY IMPORTANT REPORT: It’s worth taking another look at last Friday’s dramatic jobs report. There were three very big implications:
1. A recession is not imminent. We continue to believe that predictions of an imminent recession are ridiculous, and the jobs report confirmed that the economy is snapping back from the winter doldrums. The Atlanta Fed has first quarter GDP growth at 2.1%, and that’s supposed to be the weakest quarter of 2019. Growth of 2-1/4% to 2-1/2% seems likely this year, enough to keep unemployment well below 4%.
2. A Fed rate cut is off the table. A 2019 rate cut always struck us as unlikely; with Friday’s report there’s no chance the Fed will cut rates in any time soon. In fact, if the economy bounces back robustly this spring, a second half rate hike can’t be ruled out, which would enrage the White House.
3. Donald Trump, the re-election favorite. He won’t get his way with the Fed, but Trump has a red-hot labor market, decent GDP growth and low interest rates. Thanks to the energy price spike, inflation may surge for a couple of months, but the economy is the major reason why the embattled president is the early favorite in 2020.
THE HOT NEW IDEA: Everyone seems to be buzzing the Modern Monetary Theory; we strongly recommend a detailed piece in yesterday’s New York Times business section. Proponents are mostly — but not entirely — liberals who believe deficits don’t matter; spending is considered a plus, a stimulant for the economy. Well, Washington is very happy to help — outlays continue to surge, and lawmakers may abandon strict spending caps later this year.
OUR TAKE ON MMT: There’s little correlation between red ink and interest rates; the Cassandras were wrong on this crucial point. But year after year of deficits well above $1 trillion will begin to raise a serious issue: debt servicing costs will surge, which could crowd out virtually all domestic spending. But that’s a problem for 2024; for now MMT is all the rage.
JOE BIDEN, DINOSAUR: The former vice president reacted to the controversy about his un-wanted touching by joking about it, still another sign that he’s tone deaf. And, deservedly, he got skewered on Saturday Night Live. This comes as party insiders express surprise over the glacial pace of Biden’s campaign ramp-up; most of the top political and policy talent has been locked up by the other candidates, and Biden is far behind in organization in fundraising.
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), Highstreet Asset Management Inc. (Highstreet), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI and Highstreet are registered as portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. 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.
© 2020 AGF Management Limited. All rights reserved.
