I remember the days when election day was the day we voted and the day we learned who won. So nice that we have made so many improvements to our system.
As I’m sure you know, voting has been going on for some time now – with absentee and mail-in ballots. And if the past is any indicator, all the votes won’t be counted for some time after election night.
Sorry to be a little “glass half-empty,” but I think most of us are ready to move past all of this and are hoping for better days ahead.
So, what might we expect for the next few weeks and then going forward for 2025? Markets have performed beautifully most of this year. We had one correction and a few bumps, but overall, it has been great. This leads me to believe that a little short-term volatility might be a normal part of this election process.
Politics aside, the market has agreed that the economy is doing well. Some of those reasons are low and stable employment, much lower inflation, strong and mostly stable consumer spending, and interest rates that are trending mostly lower. These are good financial conditions, and it appears these conditions can continue for at least a while into 2025.
Back to the election, both presidential candidates have promised far more than they will likely be able to implement or pay for. We are also likely to continue to have a divided congress, which will forestall any big changes/improvements. We also have to address the $35 trillion dollar elephant in the room – too much debt and no plan to reduce it. Our national debt has been growing for the last 20 years and we may be getting close to the point that markets won’t keep lending us the money to go much further.
How will we know when we reach our market-imposed spending limit? If history is a guide, interest rates on treasury debt will climb even as the Federal Reserve tries to lower rates. We would also see the auctions (where treasuries are sold to the open market) go poorly. Meaning not all the treasuries are sold and the yields will again rise.
The goal of both candidates seems to be to spend and grow our way out of this conundrum. The spending part is well rehearsed – the growth part is harder. We are currently growing our GDP at around 2.5%. If the economy grew at 3.5% - 4% we could “grow our way out” over time. But a lot of things would need to go right for a long time.
All things said, I am cautiously optimistic about the economy for the next couple of years. Yes, there are some storm clouds out there and we will keep monitoring the radar – but for now I see no reason to interrupt your normal programing. As always, if you are experiencing changes or challenges, let us help!
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