Business and Finance
First quarter growth may not be nearing initial projections, but economists remain optimistic for the rest of the year. Liz Ann Sonders, chief investment strategist at Charles Schwab, said: “The economy still looks strong and we believe the upcoming earnings season will be solid.”
The National Bureau of Economic Research (NBER) published a report early this week demonstrating a correlation between national conception rates and economic recessions. According to the report, pregnancy rates have dropped prior to economic downturns several times over the last few decades, indicating that they can predict the economic trajectory.
The report calls the findings a “new business cycle fact”, stating that the “the growth rate of conceptions declines prior to economic downturns and the decline occurs several quarters before recessions begin.”
“Our findings suggest that fertility behavior is more forward-looking and sensitive to changes in short-run expectations about the economy than previously thought,” the report explains. “The (2008) recession began in December, as later determined by the NBER, and by this time conceptions had already been in decline for months,” the report said. It adds that all normal economic indicators were positive in 2007. Consumer confidence was high and the stock market was strong, too.
Conception growth rates changes before the collapse of Bear Stearns and Lehman Brothers, as well.
“Bear Stearns did not collapse until the end of the spring of 2008. Several months later, in September of 2008, Lehman Brothers collapsed, an event sometimes considered a catalyst in the great recession,” the economists noted. However, conception rates in the first three quarters of 2008 were already 100,000 lower than those of 2006, and falling.
“Once you examine monthly or quarterly data, the pattern becomes obvious,” said one of the study’s authors Daniel Hungerman. “We show the existence and magnitude of this pattern before the Great Recession, and it’s striking since that recession was famously hard to predict. None of the experts saw it coming,” he said, “And in its first few months, many business leaders were convinced the economy was doing OK — even as the number of conceptions plummeted and had been falling for a while.”
According to the report’s data, conception rates predict upcoming downturns more accurately- and earlier- than GDP growth rates.
Taking the month of January to reflect on economic ebbs and flows in America over 2017 we find a lot of conflicting data that leaves us with a somewhat inconclusive picture on how the economy in the region is faring. Still, it’s good that there are a lot of positive indicators for financial stability and economic growth in 2018.
When there is talk of a country having a strong economy, Forbes contributor Salvatore Babones assesses this to mean that there is more capital entering the country than leaving it (as there is a large trade deficit).
Who, and what, is responsible for this? it’s hard to say given that when Trump came into office, he was able to enjoy the “longest uninterrupted stretch of private sector job growth ever recorded.” So it cannot really be attributed to our President.
Having said that, last year American stocks returned a staggering 20 percent. Given that the new tax law is lowering corporate rates, companies are being encouraged to bring back some of the monies that they had overseas in an effort to not have to encounter inhibitive taxes. As the money comes back to America there are additional M&As, dividend payments and stock buybacks happening.
In other positive news in Q4 2017 the economy encountered its fastest growth since 2015. This has resulted in greater spending from a heightened consumer confidence.
President Trump signed the Republican tax bill on Friday, bringing a wave of changes to the way American citizens and businesses pay their taxes. Mr. Trump called it a “historic moment for the American people.”
The new laws are expected to impact many sectors this year. According to Zacks Investment Research research director Sheraz Mian, the tax reform “will have a big impact on corporate profitability … all of it positive,” thereby supporting the stock market, albeit slowly.
Meanwhile, experts project a slight decline in real estate as a result of the bill, as well as a rise in corporate activity such as expansions and acquisitions. For individuals, on the other hand, the tax return process will likely be simpler moving forward.
According to Morgan Stanley, a GOP plan to place US corporate taxes within the 20% range could significantly boost the country’s economy.
Retirement plans are almost always considered a priority, and most people have some form of account in place. Once you decide to start saving, however, the real challenge is determining where and how. There are numerous options, and all have different advantages (and disadvantages).
Essex Financial VP and financial advisor James Sullivan explains that first, everyone needs to define a hierarchy for themselves. Once they do, the key is learning which savings platforms best meet their needs.
Getting your employer to match your 401(k) contributions is the best place to start. Once that’s done, consider your tax brackets but current and future. Pre-tax retirement accounts and IRAs are most suitable for those who predict lower tax brackets at the time of their retirement. Roth accounts, on the other hand, work well for those who anticipate higher tax brackets in the future.
“Frankly, we don’t know what the tax code will be next year,” let alone in a few decades, Sullivan cautions. He suggests considering your current age rather than tax bracket alone. He believes that 20 years is a good marker; if you have at least 20 years before retirement, a Roth account may be more advantageous. However, some employers will only match a regular 401(k), which you should choose over a Roth IRA. He explains that employer-sponsored plans are automated, which is a tremendous benefit. Small amounts are saved throughout the year, instead of a lump sum being contributed at the end of each year, when possible. Retirement plans that are sponsored by an employer are also protected from creditors, as opposed to IRAs which often are not.
Sullivan recommends switching from a 401(k) to an IRA later on in the process. “401(k)s are great for accumulation, but IRAs are much better for funding your retirement. Why have your former employer still involved with your finances when you don’t work there anymore?”
According to recent reports, the U.S. economy accelerated during the second quarter, surpassing previous predications and reaching its fastest growth rate in over two years. However, the third quarter will likely show a loss of momentum because of the hurricanes which battered the country at the start of the season.
The Commerce Department gave its third estimate earlier this week, revealing that GDP increased at an annual rate of 3.1% between April and June, demonstrating an increase in inventory investment.
Economists throughout the U.S. expect the damage from Hurricanes Harvey and Irma to reduce up to 6/10s of a percentage point in growth in the third quarter.
“The destruction caused by Hurricanes Harvey and Irma and the resulting disruption are expect to be a drag on third-quarter growth,” said Plante Moral Financial Advisors CEO Jim Baird. “Nonetheless, the economy remains on track.”
Hurricane Harvey has impacted retail sales, industrial production and homebuilding and home sales, and other markets will likely see damage as a result of Irma’s strike as well. Rebuilding and development in the aftermath of the storms, however, are likely to boost gross domestic product growth in the fourth quarter as inventory investments from businesses increase.
Daniel Silver of JPMorgan explained: “The data available so far suggest that the firming in real inventory accumulation between second quarter and third quarter could be significant and could add over a full percentage point to growth in the third quarter.”
In recent news, Novartis Chief Executive Joseph Jimenez is going to be retiring in 2018. Starting in February, 2018 Vasant Narasimhan, the chief drug developer for the company, will take over as CEO. Jimenez is stepping down after a decade of service at Novartis and after securing U.S. approval for a new gene therapy for leukemia.
As Jimenez said, “After 10 wonderful years in Switzerland, my family is ready to return to Silicon Valley and the United States.”
Narasimhan has been with Novartis since 2005 and became global head of drug development and chief medical officer in 2016. Chairman Joerg Reinhardt said “Vas is deeply anchored in medical science, has significant experience in managing the interfaces between research and development and commercial units and has strong business acumen with a track record of outstanding achievements.”
Certainly this is good news for the cancer drug market. AstraZeneca announced recently that its immunotherapy drug Imfinzi has been granted a new status by U.S. regulators. It will now be considered as a “breakthrough” designation by U.S. regulators for treating non-metastic lung cancer.
This status allows the drug to, hopefully, have a quick regulatory review and it confirms that the drug is working for early stage lung cancer.
Learn more about the drug and its new status.