Market Viewpoints
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"There are no facts, only interpretations."
Summary:
The US unemployment rate, currently at +4.3%, has now hit a 16-year low and shows that the labour markets are tightening. However, wage growth is still stuck at a low level. The US Federal Reserve (Fed) is still faced with a disinflation problem. The European Central Bank (ECB) is not ready to commit to any timescale on tapering or to provide any “forward guidance” on it. In fact, there appears to have been very little debate at the ECB meeting last week about how much more easing may or may not be needed going forward. Recently the media has been abuzz with reports that central bankers in the US, Canada, the Eurozone and the UK had signalled that the days of easy money are nearing an end. Sounds like wishful thinking to me! The Fed, the ECB and the Bank of England (BoE) have all pulled back, after sounding hawkish temporarily. The easing bias is set to continue and, therefore, there is little risk of an equity market sell-off anytime soon. If President Trump could do anything to ease the regulatory burden that the US economy carries, it would be a big boost to the GDP growth. Americans spent an eye-watering $1.9 trillion in 2016 just to comply with federal regulations. If it were a country, US regulation would be the world’s seventh-largest economy, ranking behind India and ahead of Italy. The regulatory tab of the US is nearly as large as the total pre-tax profits of all its corporations.