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Despite Frights, Can The Expension Continue? By Fulbright Financial Consulting, PA Thumbnail

Despite Frights, Can The Expension Continue? By Fulbright Financial Consulting, PA

The nation is in a trade war with China, the manufacturing sector has fallen into a recession, and an impeachment of the President fraught with political uncertainty is under way. With so many frights haunting investors this Halloween, it’s important to note that the worst stock market scares of the past year all followed actions by the Federal Reserve Board, and the Fed has been able to avert Wall Street’s worst fears. An economic growth rate of about 1.8% annually is sustainable as long as the Fed does not make a policy mistake, which is always possible. Fed mistakes have caused every recession in modern history. But a subtle trend shown here is that the nation’s central bank has been able to lengthen the business cycle in recent decades. Fed Chairman Powell has said the Fed may be able to extend the current cycle of growth in gross domestic product well beyond the 123 months already achieved. Central banks have learned how to better manage national economies, a sign of progress in the modern era that has unfolded slowly in the post-War period. Since Alexander Hamilton revolutionized central banking in 1790, the United States has learned from its mistakes. The Fed used new modern tactics to stop the world financial system from collapsing in 2008 and its three-stage quantitative easing program — a central bank tactic never before attempted in a major economy — helped refinance this long expansion. The Fed is more nimble and quick to change monetary policy before economic growth is choked by high lending-rates, and the speed of information has accelerated the time it takes to promulgate monetary policy shifts. As Halloween sweeps by and the stock market hovers near a record high and seems vulnerable to frightening risks, watch the actions of the Fed in extending the expansion. Please contact us at 919-354-0368 or fulbrightteam@moneyful.com with any questions or to set up a meeting, and don't hesitate to share this video with people who might benefit from our work.