My Comments: Despite what some so called “leaders” are exclaiming, America is still a great place to live, work and dream. Sure, there are some troubling issues to deal with, but tell me, was there any point in time when there was perfection. I don’t believe you can.
Personally, I’m far more interested in what is happening today and how we can best improve on an already successful model. For example, I’m having doubts about my long held belief in free trade. As I now look at it, I realize it too has been hijacked by special interests that could care less whether I’m alive or not.
More than once I’ve shared on this forum the thoughts of Scott Minerd, who is the Chairman of Investments and Global Chief Investment Officer for Guggenheim Partners. I like how he thinks and how he expresses his thoughts. I also recognize that you don’t achieve a title like his without knowing what the hell is going on.
The following paragraphs come from Guggenheims Fixed-Income Outlook | First Quarter 2016. There’s always jargon when the subject is economics, but some is necessary. Here you have to understand the distinction between macro economics and micro economics. An analogy you might appreciate is understanding and appreciating the quality of the American beef industry and understanding and appreciating the quality of the steak you are buying from Publix. From a macro perspective, Is the industry healthy and functioning well and from a micro perspective, is the steak you buy going to be tender and tasty?
Here is Scott Minerds Macroeconimic Outlook.
Fears of a 2016 U.S. recession are overblown. A rebalancing oil market should calm markets in the second half of the year.
A sharp selloff in global equities and continued volatility in credit markets have rattled investors, but we do not believe the factors roiling the markets will derail the ongoing U.S. expansion. A stronger dollar has weighed on the U.S. economy, but consumer spending, which accounts for 70 percent of the U.S. economy, has been resilient. Aided by the windfall of lower energy prices, final domestic demand contributed 2.5 percentage points to real GDP growth in 2015 (see chart, top right).
The labor market is now operating near full employment with the unemployment rate at 4.9 percent, and tight labor market conditions are beginning to spur faster wage growth. Based on our analysis of these and other factors, we believe the U.S. economy is fundamentally sound, and find little evidence to support the conclusion that the economy will fall into a recession in 2016. Our base case is that the next recession will arrive in 2018 or later.
The decline in oil prices may be helping consumers, but as our sector managers relate throughout this report, it has taken a toll on corporate credit. Our research team’s oil model indicates that oil prices will rise toward $40 per barrel in 2016, however, as global supply and demand rebalance (see chart, bottom right).
Despite the relative health of the U.S. economy, markets are questioning the Fed’s resolve to increase rates. Giving rise to this view are concerns that sluggish global growth will hold back the U.S. expansion, that inflation will remain below the Fed’s target for longer, and that tighter conditions in credit markets have raised recession risks. Our view is that the Fed remains focused on fulfilling its dual mandate objectives of maximum employment and price stability, and thus is biased toward normalizing policy. We expect further declines in the unemployment rate as job gains outstrip growth in the labor force. Meanwhile, core and headline inflation should move closer to the Fed’s target by year end, reflecting our forecasts for a tighter labor market and a modest rise in oil prices. This should keep a couple of Fed rate hikes on the table in 2016, which we would interpret as a sign that the
expansion remains intact. A solid macroeconomic backdrop and a rebalancing oil market should support an improving credit picture in the second half of 2016.