The forecast for both the United States and the world economy appear to be “pretty sunny” this year.
At least that’s the word from Tim McGee, director of macro strategy and research at U.S. Trust-Bank of America Wealth Management.
McGee offered that assessment during the Pasco Economic Development Council’s annual economic forecast luncheon recently at Hyatt Place Tampa/Wesley Chapel.
At Bank of America, McGee manages a team of analysts that research global economic trends, and then develop those trends into investment strategies for individual clients, institutions and foundations supporting the wealth management business.
McGee’s economic outlook, delivered to a sold-out luncheon, contained predictions that should inspire confidence on the whole.
The global economy will “grow a little bit faster than it did last year,” McGee said.
“Last year, global GDP growth got down a little bit below 3%. This year it’s expected to be about a half a point higher than that,” he said. About the same should hold true for the U.S. economy this year, too, the speaker added.
The nation’s economy didn’t grow as much last year compared to prior years, but McGee noted: “we’re seeing signs that that’s starting to turn around and growth will move a little higher as the year progresses.”
In short: “We think we’re going to continue to be in this goldilocks environment where growth is good. We’ve got the lowest unemployment that we’ve had since at least the late 1960s and its staying much lower without showing signs of creating inflation as it would’ve in the past.”
There have been “hiccups” to the U.S. economy in the early part of 2020, he noted.
The coronavirus outbreak has negatively impacted stock markets, he said. Pandemics today are more disruptive to economic activity because of the globalization of the economy and an increased frequency of global travel.
“Nobody knows how bad it’s going to get,” he said, referring to the coronavirus outbreak. “What we know about pandemics is eventually they pass…but, that’s what we’ve got to contend with for a while.”
Aerospace company Boeing’s decision to suspend production on its 737 Max model airplane — due to potential safety issues, is “another thing hurting the economy,” he said.
Boeing is America’s largest exporter, and, the economic expert said that alone will “knock about a half point off of growth.”
But, this too, is viewed as a temporary issue.
And, McGee is bullish about the long-term sustainability of the U.S. economy.
America is in the midst of its longest economic expansion in its history — now going on more than 10 years, he said. During that time, the country’s inflation rate has remained “very stable” — anchoring at about 2%.
He calls the current financial climate “the most stable, least volatile economic environment in American history.”
He pointed to a number of reasons for the current state of the economy.
For one thing, the country has made a transition to a service-oriented economy — away from a “much more cyclical and volatile” manufacturing and goods producing economy, he said.
There’s also a growing retirement population. That population is living longer and has accumulated wealth, so that creates a demand that’s steady over time and not subject to fluctuations in the economy for services including health care, travel and so on.
He also touched on the impact of U.S. President Donald Trump’s economic policies.
He credited the president’s corporate tax cuts for making U.S. companies competitive again, giving them a reason to continue operating in America rather than uprooting to other countries that traditionally have had lower taxes and labor costs.
He also cited Trump’s regulatory rollbacks, which he said have boosted small business optimism nationwide.
Before Trump was elected, previously imposed regulations — many pertaining to environmental and health care, and such — had become “the most consistent complaint of small businesses,” the financial expert said.
He then pointed to a survey from the National Federation of Independent Business that suggests small business confidence has increased in each of the last three years. It’s now reached its “highest confidence levels” in the survey’s 46-year history, he said.
McGee went on to explain the Trump administration’s economic policies have begun to benefit traditional lower wage, blue collar workers, too.
He elaborated: “Wages for people with less than a college degree are starting to rise faster than wages at the top, and this is a direct result of shifting from the globalization policy to the localization policies that are more focused on helping workers and businesses in the United States.”
McGee cited the University of Michigan’s consumer sentiment index, which has indicated that America’s lower income and lower education population have expressed more confidence in their future earnings potential in the last three years.
He also referenced a January Gallup poll, which shows Trump’s job approval rating has risen to 49%, his highest in Gallup polling since he took office in 2017.
The speaker put it all into perspective: “The economy is reshaping itself — It’s helping lower income people, and that’s why surveys are starting to show people are much more happy with the way things now are than they were before.”
McGee added: “Trump’s blown up the political establishment. That’s why he’s so hated, because basically he’s reformed the Republican Party to represent workers which traditionally were democratic voters. (President Ronald) Reagan did something similar. If you look at Trump’s policies, they’re almost exactly the same as (what) Reagan did.”
Published February 12, 2020