Costs aside, to get a sense of the economic impact from the two tax plans, BofA similarly models the two plans’ outcomes using the FRB/US macroeconomic model. The simulation results suggest under the House plan, the US would see a boost to aggregate demand as growth would be approximately 0.4pp higher relative to baseline in 2018 and 0.3pp higher in 2019. Better aggregate demand would reduce the unemployment rate by 0.3pp by 2019 and put upward pressure on inflation. These growth and price dynamics would lead the FOMC to raise rates an additional 1 to 2 hikes over the next two years. The economic impact from the Senate plan would be slightly more modest but in the same ballpark as the House plan. Under the Senate plan, the model predicts growth to be approximately 0.3pp higher in both 2018 and 2019 and similar dynamics for the unemployment rate and inflation as seen in the House plan, leading the FOMC to tighten quicker than the current baseline path.
There is also an “alternative” scenario where we a watered down version of the tax plan passes (i.e. modest tax cuts for middle-income households and a corporate tax cut near 25-28% that is deficit increasing by $600bn-$800bn on a static basis). Under the “alternative” scenario, we would see approximately half the economic impact that is seen under the House plan. Given that such a plan would likely only generate modest inflationary pressures, the Fed’s response likely would be relatively muted and it would likely stay on its baseline path.
Two weeks ago a cluster of the infamous Hindenburg Omen was forming. Since then stocks have suffered their biggest drop in 3 months…
However, the Hindenberg Omen is not exactly flawless and has false-alerted a number of times in the last few years.
Which is why, John Hussman has adapted the signals and is now warning of a very significant convergence of the ‘Hindenberg Omen.
On Tuesday November 14, the number of NYSE stocks setting new 52-week lows surged above the number of stocks setting new highs, with both figures representing more than 3% of total issues traded. This “leadership reversal” joins the deterioration in our own measures of market internals last week, as well as ongoing dispersion in market breadth and participation. highs, with both figures representing more than 3% of total issues traded. As noted this couples a “Hindenburg” with a “Titanic,” and it is actually the first time since July 2007 that we’ve seen this particular combination of internal deterioration’ with the ‘Titanic Syndrome’…
Is the American Dream real or make believe? Millennials say it’s all make believe.
The Pew Research survey, conducted in August, found that 36 percent of respondents feel that their family has achieved the American dream, while 46 percent feel they’re “on their way” to achieving it.
Forty percent said being wealthy is not an important part of attaining the “American dream,” 49 percent said wealth is important and 11 percent said it’s essential.
– German gold demand surges from 17 ton-a-year to a 100 ton-plus per year
– €6.8 Bln spent on German gold investment products in 2016, more per person than India and China
– Germans turned to gold during financial crises and ongoing euro debasement
– Evidence of latent retail demand on increased economic concerns