Blog

The nation’s economy is clearly holding its own as we move through the early weeks of 2017. In fact, in certain respects, things look better now than they did three months ago. To be sure, gross domestic product growth did slow from the third to the fourth quarter, with respective increases of 3.5% and 1.9%.

Wow! The Dow Industrials made a "Tom Brady" move late yesterday. What looked like an all but certain loss turned into a gain in the last minute of play, sending the Dow to its first 11 consecutive-day gain in 30 years. This rally occurred on one of the warmest Fridays that ever hit the East Coast, sending many outside to work and away from their desks.

What a difference a year makes. For example, 12 months ago, the economy was under pressure from softening oil and commodity markets and consequent declines in business capital investment. Now, as the first quarter winds down, we see manufacturing, non-manufacturing, employment, and consumer spending all holding up well.

A couple of weeks ago, a March 15 Fed rate hike was "dead in the water." But 2 strong inflation reports, plus a strong equity market, has put a March increase back on the table. Although the doves still have the upper hand now, the hawks are making a run.

Homebuilding continues to give a reasonably good account of itself, with housing starts at their highest level in nine years, after advancing at their fastest pace in six quarters in last year’s final period. Even so, building activity is only about half of what it was at the peak of the last housing up cycle.

In contrast to Dow 10k, which was breached almost 18 years ago, when the Dow broke through the 20,000 barrier on Wednesday, it stayed above that level – at least for now. But threats are ever present. The news media had reported that Trump has warmed up to the idea of a border tax, after appearing to have rejected the concept several weeks ago.

The consumer picture is mixed. On point, retail demand continues to strengthen for Internet related purchases, and auto and building materials dealers are seeing business turn brisk. But activity is lagging badly at brick-and-mortar department stores.

What will the Trump Era Bring? Will it be endless tweets, corporate callouts, currency wars, and tariffs? If that is the case, forget about equities. But if it is a pro-business and growth platform, with less regulation and substantial corporate tax reform, stocks will greatly benefit.

The employment picture remains reasonably bright. True, job growth is slowing, as one might expect given the length of the business up cycle, with employment up by 2.2 million in 2016, more than half a million below the comparable 2015 gain.

I arrived back home last night from a week’s family vacation to Maui. Local chatter was dominated by the closing of the last sugar cane processing plant in Hawaii in December (located in Maui), an industry that had been operating since the 19th century.