Two recent items coming across my inbox:
I’d known there has been a striking favorable turn in consumer confidence in the US since the presidential election, but I hadn’t focused on how large a jump there has been until I read the latest strategy piece by Jim Paulsen of Wells Fargo. We’ve gone from being mired deep in the bottom half of confidence readings over the past thirty years to high in the top quartile–over the 90% mark by some measures, and at the highest levels since before the Internet bubble burst in early 2000.
Paulsen’s conclusion: earnings growth may be higher, and stock market performance in 2017 better, than the consensus expects. I’m not sure I’d bet the farm on this, but it is at the very least a reason to refrain from selling–and to be wary of becoming too defensive.
I’ve also read the Presidential Address for the American Economics Association, titled Narrative Economics, by Robert Shiller, a former Wall Street economist who is now a professor at Yale (he’s also the Shiller from the Case-Shiller Home Price index).
I’ve never been a particular Shiller fan, and this is a weird paper, but it’s relevance is in its attempt to identify and measure the psychological influences that affect economic performance. Its point is that story lines like those encapsulated in slogans like “Drain the Swamp” or “Make America Great Again” can have an unusually strong positive influence on actual economic outcomes. This can come well in advance of delivery on the promises being made. So even though my reading of Donald Trump’s career is that his sole personal success has been as an actor portraying a successful businessman on a reality show, it may be that his being a symbol of the need for change may be enough to energize the US for a while. If he actually can achieve tax reform and an infrastructure spending program, so much the better.