In the markets, as in life, there are no guarantees but everyone is entitled to their opinion. Here’s my opinion on the financial markets today.
One of our favorite advertising quotes around fi-plan Partners is the well-known Nike tag line, “Just Do It.” As far as the tax compromise is concerned, don’t you wish we could just put a “Swoosh” on the thing and move on? The markets certainly want to.
U.S. stocks opened higher this morning on optimism that there is a deal out there despite attempts by Democratic lawmakers to derail it. Coupled with the “tailwinds” generated from the hope that the anticipated compromise is coming, overseas data was better this morning and weekly jobless claims have fallen somewhat. Stocks would be doing even better on this combination if fears about the deficit were not creeping into the mix as evidenced by the sharp reversal in Treasuries. Frankly, we just want Congress to “Just Do It” so that we will all know where to go from here.
Here are four major points of discussion that we were having in our offices this morning that we thought would be of interest to our readers.
Being a strong advocate of independent businesses (we’re one ourselves), we love the provisions of the tax cut that favor the “heart” of the American free enterprise system. While the payroll tax savings will give companies modest abilities to enhance cash flow and re-invest the savings, the prominent impact would be the ability to fully expense capital equipment purchased in 2011.
Will we have stagflation in 2011 – rising interest rates with no economic growth? In a word, no. Our best forecasts for the year have GDP growth at 2.5 to 3% and inflation around 2%. Certainly nothing “exciting,” but definitely not stagflation, which is one tough beast to slay.
Central banks will not raise interest rates for now. Most forecasts that we see for this do not have any domestic interest rate increases until November 2011.
Asian markets rose on better-than-expected Australian and Japanese data. Helping this along are ebbing Korean fears on news of China’s involvement in the process.
As always, email me here with questions or comments. I love to hear from you and thoroughly enjoy the “intellectual debate” with our clients and friends that these opinions generate.
Greg Powell, CIMA