This has undoubtedly been an interesting election period. As a long time Republican even I am amazed that the House, Senate, and White House are now in Republicans hands.
The popular vote is very telling: as of 1:47 pm Pacific time Wednesday, November 9, 2016
Compare those numbers to the 2012 election:
President Obama 65,915,795
Mitt Romney 60,933,504
Democrats, especially the left wing of the party, were never really in love with Clinton and that probably did cost her the election.
With all that said… the future!
We are still one country and all Americans. Some people who read my work assumed I was a Democrat because like some democrats I fought against economic bears who predicted that a great American recession was imminent. But my opinion was based on my work as a data miner not on unfounded ideology.
Politics and presidents play a minor role in my economic thinking. Readers may have noticed that in the last 3 years, I rarely wrote anything on President Obama. I stick to economics. Demographics and inflation are more powerful informers of the economy than the Fed or any sitting president. Maybe that notion will give some solace to those who are disappointed with the current election results.
A lot of my left-leaning friends asked if I am bearish now on the US economy, this day after the election. Nothing has changed in my thinking except I think we might finally get a major infrastructure bill and we probably won’t raise taxes to pay for it. So, the domestic investment could be better in the next 2 years. As we can see below, domestic investment has been light recently.
And we can see from that data below that public construction spending has been light compared to residential and non-residential construction spending.
From Calculated Risk:
I love a massive infrastructure plan, and I am not afraid of the federal debt here in America. Our Country GDP and Net Asset wealth are over 125 Trillion dollars. We are the only economic superpower left in the world, and we have the U.S. dollar.
But, I don’t expect any infrastructure plan to have a super significant multiplier impact. It will be positive for sure but not this panacea of growth as some have forecast. This is a repair package that will draw workers from existing crews. We have a labor shortage in construction right now, so the ability for the government to find new workers is limited.
The unemployed are mainly high school dropouts, high school educated only, drug addicts and those coming out of jail, so employing these potential workers should be a priority of any plan. Be mindful that as all developed countries of size have limits to what an infrastructure package can do. This isn’t like building a massive amount of homes, cars, streets, commercial building for a growing labor force that didn’t have any before. Still, with that said, with the house, Senate, and White House all on the same side of the aisle, this is a deal that can happen in the short term.
The 10 years have taken off today. We are at 2.06% as I write this. With the prospect of an infrastructure package, the market for copper and lumber is probably going to play long. Until 10 year breaks over 3.04%, I still believe in my long term channel of 1.60% – 3.04% being the range for some time. Inflation is rising in the U.S. but is nowhere close to being a significant concern.
With regards to the effect of the change in the political regime on regulations, I don’t feel that I can make any meaningful predictions, other than I would imagine the banks are going to benefit from anything that President Trump can accomplish.
On the Affordable Care Act, who knows what will happen there and the free college plan for those families making less than 125,000 is probably dead. A lot of ideas and projects are still up in the air. However, stick to economic cycle data readings such as leading economic indicators and unemployment claims to get a great macro perspective of what is going on in the cycle. A lot of noise out there but math, facts, and data still matter.
America is great, It was excellent and will be great. We have solid demographics compared to the rest of the world. We have over 100 trillion dollars in financial assets, over 155 million, working men and women, the most significant military in the world, friendly neighbors, and two oceans as borders. We are going to be okay.
Granted, this election was ugly. What I saw on social media during this election, not just from the pathetic, cowardly trolls who hide behind fake names, but from non-affiliated people, was disgusting.
We can’t, as adults, treat other people this way. I can always forgive young people for their lack of integrity as they’re learning to become adults. However, both the left and right resorted to crass verbal abuse during this election, and we have to be better than that and set a better example for our children.
Speak like your kids and parents are watching.
America will be fine. I, for one, don’t believe that Trump will act like Hitler or do anything that the fascist movement of Germany did. The inherent strength of our system and our people will prevent that from ever happening.
We are still the Americas, and we always will be! Have faith in our country and our people even if you don’t agree with their politics.
Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data daily on his own facebook page https://www.facebook.com/Logan.Mohtashami