According to the chief economist for Chase, Anthony Chan, low interest rates are a main catalyst for a healthy job market and slow steady growth. Because of low rates, labor markets are tightening and the country is seeing more people join the labor force. He predicts that productivity, labor force growth and possibly even earnings will improve in 2017. He makes the comment that earnings for this year will most likely be negative but he foresees positive growth in the future since we will not have to deal with the headwinds of energy or the headwinds of a stronger dollar.
This article also mentions the opinion of the UBS portfolio manager, Alan Rechtschaffen. He believes that the low-interest environment could predict a positive stock market. He expressed his concern about the upcoming presidential election because the next president will need to pay attention to the stock market, especially when it comes to government spending and global trade. He makes the comment that the participation of open trade has become a front-burner item and he says that whoever our president ends up being, will have to be a leader who is going to be able to work with Congress and work to move this economy forward.
http://www.cnbc.com/2016/10/10/low-interest-rates-may-not-be-as-bad-as-you-think.html
It is never a horrible to have interest rates very low, but it isn't good either. With these low interest rates we have seen our labor market really improve as our unemployment rate is very low. But you also must think with these low interest rates it is harder for people to get loans from banks. It will be interesting to see if the FED bank decides to raise the interest rate as they mentioned it last week.
ReplyDeleteI think it's interesting where you say the next president will need to pay attention to markets, specifically when it comes to global trade. Given the level of anti-trade rhetoric we have heard during this election cycle, I would be concerned about this translating into policy that could hurt our economy, no matter which candidate is elected.
ReplyDeleteAs mentioned in the article, lower interest rates aids a healthy job market and slow, steady economic growth. A great sign is the tightening of labor markets and increase in the labor force participation rate, indicating that more people are actively seeking work. Labor force growth and earnings will grow in 2017, adding to the positive impact that low interest rates have on the economy. But, interest rates must not be so low that the opportunity cost of spending money as an asset decreases and there is low incentive to invest money in banks, because of their lower return. In fact, there is a greater incentive to loan out money from banks, thereby increase personal debt. It is really interesting to see what policies the next president holds, pertaining to government spending, local trade, and whether it is a positive decision to participate in open market trade.
ReplyDeleteLow interest rates don't mean the end of the world, but it's not beneficial either. One important aspect in the excerpt above I noticed is the influence the president may have in regards to government spending. Two questions: What is the extent of power the president has in government spending? What branches and departments of government help?
ReplyDeleteThe thing that is scary about the article is that Chan says creating trade barriers would produce Depression-like results, which makes sense since protectionism prevents economic growth, but the presidential candidates both have been pushing to scrap the TPP agreement which would benefit the economy. This is a trade barrier and I would hate to see Depression-like results come out of it.
ReplyDeleteChan also predicts that earnings "could" pick up and admits that earnings will probably be negative this year. That doesn't sound like very positive reinforcement to me and I don't want to follow a route that "could" increase earnings, I'd want something more guaranteed.
One thing to take into context of Chan's analysis and advice is the social and economic context cannot be viewed as faulty or truth until the future turns to the present.
ReplyDeleteIt is concerning how the how the outcome of this presidential election will politically affect global trade, I am more concerned with the standard of living according to Alan Rechtschaffen's concern, it could bring a negative effect in the market. In Britain people are upset that some of the products they used to like are no longer selling in the country, which can be lowering their standard of living since they're not happy about the outcome.
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