The homely saying is that what goes up must come down, although the stock market is trying to disprove it in the new year, just as it did in the old. With indexes at all-time highs, there may be a case that a correction in rising markets is around the corner, but most of us will be quite happy to see that eventuality later rather than sooner, including workers and President Donald Trump.
The new tax cuts from Trump and the Republican Congress should add more money to workers’ pockets once withholding is adjusted. Business investment has picked up, after being a bit slower than in previous expansions, the Institute of Supply Management reported in December. While U.S. sales of new vehicles are expected to fall 2 percent to 17.1 million in 2017, according to Kelley Blue Book, the vital car industry is still having a strong run since 2009.
Prosperity is shared, as worldwide America’s trading partners are also seeing better economic times. First returns in the new year showed stock indexes tended to rise around the world, from South Korea to London and Paris.
Exports should be good for business with the international economy hitting on all cylinders: The market for products from Louisiana’s petrochemical manufacturing complexes appears robust, for example.
All this good news does not mean that every silver lining has its dark cloud, another homely saying. The fancy word for “surprise” is what economists call “exogenous shocks,” the events that trigger downturns, even recessions.
Walter Shapiro, of The Brookings Institution, notes that today’s bull market is the fruit of one of the longest expansions on record, exceeded only by the Clinton-era 1990s. No one can predict a correction in the markets, or a more general downturn, but history has its rhythms: “It is instructive to recall that one year before the last three recessions, most analysts assumed that growth would continue,” he wrote at the end of the year.
Three recessions were the results of a weakening economy hit by external surprises, such as oil price rises from Middle East conflicts, interest rate shifts on housing, or malfeasance in the financial system as in 2008, Shapiro says.
Does this mean a sudden downturn is nigh? Perhaps not. After all, it would be hard to find any prospect of an oil-price shock when the United States, led by Louisiana companies, is an energy producer because of shale oil and gas development.
But mistakes, whether in “irrational exuberance” of the stock markets or bad judgment in political circles, can endanger our economy. The president has missed an opportunity by cratering the Trans-Pacific trade agreement negotiated during the previous administration; talks drag on about revisions to the North American Free Trade Agreement. Messing with NAFTA, what had seemed a settled part of the business landscape, can become one of the “exogenous shocks” that could hurt in 2018.