U.S. & World Economy by Mark:
Irrespective of the news “noise” and saber rattling, the fuse has been lit for the “Trump Trade” once again. Over the last 4 – 6 weeks U.S. focused stocks, interest rates and the U.S. Dollar have all surged from the doldrums. As we head into the historically volatile month of October, the U.S. economy is finally achieving a 3% GDP growth rate (second quarter revised) and the financial markets are strong. Hopes are gaining for a Federal Government tax reform, which comes at a good time for us Californians who have the highest state income tax, sales tax, gas tax and vehicle tax in the country (according to the Orange County Register). However, our ability to offset these taxes against our federal taxes will be a major battle. As we wrote in our January 2017 newsletter, we believe lower taxes will again help GDP growth and, surprisingly, help with Federal Government deficits as they have done in the past.
While inflation has stubbornly remained below the 2% Fed target, interest rates have started moving upwards in anticipation based on our low unemployment level, increased GDP, pro-business agenda, hopes of tax reform, and the impact of the Fed starting to sell off their $4 trillion holdings. Time will tell if this is the start of a multi-year trend or another false start.