Lindsey Report December ’17

The Dow, Nasdaq and S&P 500 continued setting records in November and early December: all three have set 50+ record highs in 2017 (AP). The rise in the U.S. equity markets seems to be grounded in economic optimism and strong corporate profits.

One of the more compelling reports that came out in November was from the Bureau of Economic Analysis. They reported that the U.S. economy grew at 3.3% in the third quarter. This was the second of three readings. This was the strongest growth in the economy in over three years. A very important piece of the report showed that business spending on equipment grew at 10.4%. Business spending has been somewhat of a laggard during the current growth cycle and hopefully this is a positive indicator for future business activities (Bloomberg).

Of course the markets have also been reacting to the prospect of corporate tax reductions. The markets like this because it will likely benefit U.S. companies: when something is good for U.S. businesses, it will likely be positively reflected in stock prices.

The Tax Foundation statistics show that of the 202 tax jurisdictions they follow, the U.S. has the 4th highest tax rate (38.91%), trailing only the UAE, Puerto Rico and Comoros (a small island of the coast of Mozambique). The worldwide corporate tax rate has steadily fallen since 1980 from an average of 38% to a current average of 22.96%. Europe has the lowest average rate at 18.35%. The U.S. rate is competitive for the 1980’s, but we have not kept up (Tax Foundation).

In addition, the jobs market continues to be strength with the unemployment rate falling to 4.1% (the lowest since 2001), and the economy added 228k jobs in November (Trading Economics). Moreover, consumer confidence hit a 17 year high in November (AP). Wikipedia defines consumer confidence as “an economic indicator that measures the degree of optimism that consumers feel about the overall state of the economy and their personal financial situation”.

 

The opinions voiced are for informational purposes only and are not intended to provide specific advice to any individual. To determine which investments are appropriate for you, consult myself prior to investing. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. The economic forecasts set forth in this commentary may not develop as predicted and there can be no guarantees that strategies promoted will be successful.

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