“Once again, it’s a very solid jobs report,” he told us. “Strong and steady this year.”
We asked Hassett about the turbulent stock market, which is down about 1% this year, despite a sharp drop in the corporate tax rate that has sent profits surging. “We’re not surprised to see the market fluctuate enormously,” Hassett told Yahoo Finance in the video above. “We’re still confident about the fundamental trend, which is that the economy will grow by 3% next year. If we continue to grow the economy at 3%, then think about what earnings and profits will be over the next three or four or five years. Of course, equities will have to go up a lot from here.”
The problem is that many economists don’t think the economy will grow by 3% for the foreseeable future. In fact, the mainstream view is that growth peaked this year – partly because of the tax-cut stimulus — and will slow notably during the next few years. Moody’s Analytics expects GDP growth to come in at 2.9% this year and next, but then fall to 0.9% in 2020. Some economists think there could be a recession by 2020 or 2021.
Hassett himself notes that “the global economy has slowed quite a bit compared to what we thought as recently as last summer.” But the slowdown is mostly happening outside the United States, as Europe struggles with Brexit and debt problems, and China takes a hit from the trade dispute with the United States. “The U.S. economy is chugging along,” Hassett says, “but the rest of the world isn’t.”
American companies aren’t immune from problems elsewhere, however. About 40% of the revenue of companies in the S&P 500 index comes from outside the United States. President Trump’s tariffs and other protectionism trade measures, meanwhile, have raised costs on U.S. companies and dinged business confidence. Trump and his negotiators insist there will be a favorable outcome in the dispute with China and other trading partners. But so far, there are just tariffs and escalation worries. Markets are not as optimistic as the president’s economists.
- A recession is coming–but this isn’t it
- Trump’s trade war will drift into 2019
- Trump’s Russia connections are getting clearer
- Trump has the GM problem backward
- Trump’s tax-cut party is officially over
Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman