The First Acceleration began with the election of President Trump as Smart Money anticipated pro-growth policy inspiring and compelling intelligent risk. Instead of a ‘Stimulus Package’, and relying on the Fed to shock the market with Quantitative Easing, Trump has led long-term structural changes securing sustainable growth.
The Tax Cut and Jobs Act, fairer trade, clawing back regulation to force legislative transparency and reduce unnecessary burdens, foreign policy demanding more responsibility from allies and more accountability from adversaries, strict enforcement of immigration law, and strong commitment to boarder security collectively built a foundation of Leadership Trust. This Trust increased Q4 2017 earnings by 13% over Q3. Q1 by 17% over Q4 2017. Q2 by 20% over Q1. Q3 by 25% over Q2. Q4 earnings are just starting to come in and forecast to be 12-14% better than Q3. Slowing growth reflects the impact of 4 rate hikes by the Fed in 2018 increasing Mortgage Rates by more than 20%.
Yes the First Acceleration took place despite the Fed unwinding its Balance Sheet and adding $440 B to the annual cost of financing a $ 22 T deficit. Pretty amazing. Remember Capitalism is the monetization of Trust!
The stage is being set for the Second Acceleration to be triggered by the following events; i) should the Government Shutdown extend to 30 days then federal employees can be legally fired imagine the benefit of culling counterproductive personnel ii) economic reporting affirming low inflation and sustainable growth keeping the Fed sidelined in 2019 and iii) an Infrastructure Spending Bill with significant private/public partnership component is passed as neither Republicans nor Democrats can afford the political blowback if not achieved well ahead of the 2020 elections.
The Wild Card is how the public will react when unredacted version of DOJ Inspector General Horowitz’s June 2018 Report and supporting documentation (FBI 302’s, txt messages, and emails); and yet to be released report on FISA fraud become public.
Please note potential disclosures made possible by establishment of the Space Force should also be expected to have profound impact on the market and economic growth.
Make no mistake, if you thought the last 30 months were crazy then know the warm-up band hasn’t even left the stage.