Monday, Federal Reserve Vice Chairman Stanley Fischer spoke about the dangers of low-interest rates. Fischer, whom many think has a better handle on running monetary policy than even Janet Yellen, contradicted the chairman and upped the ante on the interest rate hike game. The following are his warnings:
- Longer and deeper recessions
- Makes the economy more vulnerable
- Threatens financial stability
Ironically, maybe we are seeing in real time those warnings as the Atlanta Fed now sees the third quarter Gross Domestic Product (GDP) at 1.9%, after initially modeling 3.5%.
However, I was sure the fix was in for the third quarter GDP. Perhaps a surge in business investment can lead to a number north of 2.0%. It’s amazing how much lower the assumption is now from only a month ago. The irony is that this proves Fischer’s point. And yet, at the same time, it makes it harder for the Fed to hikes rates.
Oh! What a tangled web we weave…
Earnings Season
Earnings parade after the market closed on Monday with mixed results:
Netflix (NFLX) beat consensus and streaming margins have increased to 18.8% from 17.5% a year ago. With 8% of the float short, we could see a big squeeze this morning.
United Continental Holdings (UAL) posted earnings of $3.11. The Street was looking for $3.06, but shares skyrocketed higher.
International Business Machines (IBM) beat on the top and bottom lines, but management only reiterated its guidance and the Street has pounced.
Weighing the Economic Plans
The Tax Foundation has weighed in and found that Donald Trump’s plan significantly boosts the economy more than Clinton’s short-term plan, but it concludes that a longer-term growth would suffer from an additional $10 trillion in debt over the next ten years.
|
Presidential Economic Plans |
Trump |
Clinton |
|
GDP |
8.2% |
-2.6% |
|
Cap Investment |
23.9% |
-7.0% |
|
Wage Rate |
+6.3% |
-2.1% |
|
Jobs |
2.2 million |
-697,000 |