No doubt you saw the screaming headlines in the New York Times, Washington Post and TV outlets like CNN and MSNBC about how household income is at an all-time high. Oh wait, that headline must have gotten bumped for the droning over the Russian collusion probe, almost two years old with no evidence of collusion put forward.
The headlines that never saw the light of day
Investor’s Business Daily reports that median household income hit $62,450 which surpasses any figure in the 18 year history of the Sentier Group, the research firm that produces the report. IBD goes on to say that HHI has risen 4 percent in the 19 months since Donald Trump took office. In the entire eight years of the Obama Administration the average HHI rose a paltry .3 percent.
No wonder President Obama tried in a speech recently to claim credit for the sudden growth, saying the ground work for that was laid under his administration. He wishes!
But wait, there’s more
Fast on heels of the income data was an upward revision of the Commerce Department’s second quarter GDP growth estimate, from the previously reported 4.1 percent to 4.2. Recall the monotonous litany during the Obama years when quarter after quarter the media reported that GDP grown was “unexpectedly low”, usually at 2 percent or less. Unexpectedly, only if you think that bloated government promotes growth. It does not. It suppresses it.
GDP growth was deteriorating even further the last two quarters under Obama. No wonder that the Conference Board’s Consumer Confidence rating has hit 133.4, an 18 year high and towering over the 98.6 figure just before the 2016 election.
How will the Fed respond?
As Jerry has said often on Smart Money Radio the policies put into place by Trump will produce prosperity for years to come, at least as long as Democrats don’t regain majority power status and undo it all. The midterm election on November 6th will be pivotal in that respect.
Meanwhile all eyes are on the Federal Reserve, which raised the federal funds rate another 25 basis points on Wednesday this week, and is expected to raise it again in December. The Fed has made clear its intention to raise the rate three times in 2019. Fed Chairman Jerome Powell expressed no concern about inflation rising faster than the Fed forecast of 2 percent next year, but said that if it does exceed forecast the Fed might raise rates more aggressively.
That, along with rising oil prices and labor costs due to accelerated hiring are the potential pitfalls for this aging bull market, for bonds and thereafter the economy overall.
Contact our office for a complimentary portfolio review.
Register for our next Smart Money Investor Training workshop.
Listen to the latest edition of Jerry Tuma’s Smart Money Radio.