What We Heard in Michigan Last Week
Author: Greg Valliere
July 29, 2019
BEYOND THE BELTWAY: It’s always illuminating to spend time with investors, ordinary voters and old friends who live outside of the infamous Washington Beltway. We were at a conference in suburban Detroit last week and got an earful, as we summarize below: . . .
RUNNING OUT OF WORKERS: With an unemployment rate of 4.4% (down from nearly 12% eight years ago), Michigan has run out of skilled labor. Everyone we talked with said the economy could be even stronger if there were more workers; some business leaders asked why there’s no H1-B visa reform, which would ease restrictions on immigrant workers.
A WHIFF OF INFLATION: No one likes the tariff wars; business uncertainty is rising. But we heard one surprising complaint — inflation may begin to rise because Michigan manufacturers are paying more for component parts made in China. That issue — plus intense competition for workers — could begin to re-kindle inflation, according to several business officials we spoke with.
DISGUST OVER THE SPENDING BILL: There was widespread astonishment over the budget pig-out that cleared the House last week and should pass in the Senate in a few days. Both parties — and President Trump — get roughly equal blame.
LITTLE SUPPORT FOR TARIFF WARS: Not even the auto industry favors tariffs on foreign autos, and while there’s agreement that China doesn’t play fair, there’s a strong sentiment in Michigan that Trump’s trade wars are keeping the economy from growing even faster.
NO ONE CARES ABOUT IMPEACHMENT: There’s no great affection for Trump, even among Republicans, but there’s virtually no support for impeachment. Most people we talked with agreed that it would be a waste of time, and extremely divisive, with no prospect of conviction in the Senate.
BUT TRUMP IS IN TROUBLE: Trump won Michigan by 0.23% in 2016, a razor thin margin in this crucial state, which has 16 electoral votes. Virtually everyone we talked with said Trump currently is the underdog in Michigan; there’s “Trump fatigue” as his tweets become increasingly divisive. There’s over 15 months to go, so much can change — but this sentiment is important; if Trump loses Michigan, Pennsylvania and Wisconsin, he might fall just short of 270 electoral votes, despite the solid economy.
IT’S QUITE A STORY: Michigan was flat on its back a decade ago, and now Detroit is on its feet and the state is growing solidly — so the boom is not confined solely to the Sun Belt. Does this tight-labor climate warrant a Fed rate cut on Wednesday? We don’t think Michigan needs one, but more stimulus — fiscal and monetary — is coming whether the economy needs it or not.
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.
© 2019 AGF Management Limited. All rights reserved.
