Economics and Inflation

[RiverRat1]

I'm no expert... This is tough to explain but most should get my drift. The FED does easing or tightening of monetary policy to try and control the economy. They don't want it going too strong or inflation runs. They don't want it too weak or recession/depression. But basically as people make more money than disposable income they invest in markets (or land etc but that indirectly causes markets to rise also). When economy is weak they "print" money that eventually causes inflation which, when controlled compared to GDP isn't or does not have to be a bad thing.

So now here we are still having inflation. So my question for FAs and economy people is this... If the FED raises rates more to slow inflation that could put bonds over 5% If they are not already there. Also we have trillions in wasteful spending most likely putting billions into the markets every day (as people pocket the money and invest it).

If the current admin stops or slows inflation AND cuts these trillions how much will these combined affect the stock market?

Is it possible to stop inflation, cut government spending by trillions and still have record high stock markets?

This is the simplest I could put it. Not trying to predict markets or anything. Just looking for reasonable possible outcomes going forward.

[txbowman12]

In a vacuum, reducing federal spending will reduce GDP. That reduced gdp could cause softness in the economy (increased unemployment, lower earnings by companies from lack of federal dollars, either directly or indirectly), which would lead to a cut in interest rates to stimulate things

so all that can happen together, the impact of the stock market all depends on timing. A shock to the labor market or the economy could send things down faster than the fed can catch it. There is a scenario where companies grow enough to offset fed spending reduction, and gdp stays healthy. How will it really play out? Who knows.

At the end of the day though, I would rather things break because we are trying to do something different, vs just keeping the deficit spending train going until we run out of track and can’t fix it (except through Weimar Republic style hyper-inflation)

[60 Deluxe]

The classic explanation for the cause of inflation is "too much money chasing too few goods". The standard method of control is changing the money supply to effect whatever change is desired. What no one has ever tried until Trump, is producing more goods to soak up that excess money. Producing goods produces jobs, and more money in circulation is the result of more jobs. That money drives demand for more goods and what you end up with is called prosperity. Prosperity is good for the markets.

[RiverRat1]

Well it ain’t looking good right now!

its my guess we are in for a long wait for markets to hit new highs again. Possibly more than 3-5 years.

hope I’m wrong

[Death from Above]

Energy will be the key and offset short term drops once real deregulation comes online

[Killer]

Yep, it does not look good in the near future

[Rcole1310]

The tariffs sure didn’t help the situation. I think Trump thought these countries would fold under the tariff threats (especially Canada) they called his bluff. I give him credit for being honest on Barteromo and saying he couldn’t rule out a recession.

[Man]

I putting my confidence in him and his team...but maybe he should have tackled Mexico, Canada and China at different phases instead of all at once.

[GarGuy]

The tariffs sure didn’t help the situation. I think Trump thought these countries would fold under the tariff threats (especially Canada) they called his bluff. I give him credit for being honest on Barteromo and saying he couldn’t rule out a recession.

A year from now, trade with America will be drastically more fair and many companies will bring their manufacturing back here. He's not bluffing.

[BrianL]

Those countries don't pay the tariffs the American public pays them. This tariff war is looking like it may slow or stop US growth and increase inflation if we continue down this road. Rising fear of rescission and possible Stagflation...

[BrianL]

Might better buy now if you are wanting one of these vehicles. A 25% tariff could add $4-25k per vehicle. Tariffs on these were delayed till April 1st.

https://www.autoweek.com/news/a64060601/cars-and-trucks-made-in-mexico-canada-china/

Cars and Trucks Made in Mexico

• Chevrolet Silverado: Some made in Silao, including the 1500 model.
• Ford Maverick: Made in Hermosillo.
• Ford Bronco Sport: Made in Hermosillo.
• Ford Mustang Mach-E: Made in Cuautitlan.
• Audi Q5: Made in San José Chiapa.
• BMW 2-Series: Made in San Luis Potosi.
• BMW 3-Series: Made in San Luis Potosi.
• Chevrolet Equinox, Equinox EV: Some are made in San Luis Potosi and Ramos Arizpe, others in Ingersoll, Ontario, Canada.
• GMC Terrain: Made in San Luis Potosí. The first gen was built in Ingersoll, Ontario.
• Ram 1500 and 2500: The Ram 1500 is made at the Sterling Heights Assembly Plant in Michigan and at the Saltillo Truck Assembly Plant in Mexico, while the Ram 2500 is made in Saltillo.
• VW Jetta, Taos and Tiguan are made in Puebla, Mexico
• Honda Fit and HR-V are made in Celaya, Mexico

Cars and Trucks Made in Canada

• Honda CR-V: Made in Indiana, Ohio, and Alliston, Ontario.
• Toyota RAV4: In addition to other factories, this popular SUV is made in Woodstock and Cambridge, Ontario.
• Lexus NX: In addition to two locations in Japan, the NX is made in Cambridge.
• Lexus RX: Made in Cambridge, Ontario.
• Chrysler Pacifica and Voyager: Made in Windsor, Ontario.
• Dodge Charger Daytona: Stellantis Windsor Assembly Plant in Windsor, Ontario.
• Chevrolet Silverado: Made in three US plants as well as in Oshawa, Ontario, and Silao, Mexico.
• Ford Mustang GTD: Finished in Markham, Ontari

[SaltwaterSlick]

A year from now, trade with America will be drastically more fair and many companies will bring their manufacturing back here. He's not bluffing.

No way!! Obama told us way back yonder, "those jobs are gone forever!!"

[Artos]

I don't understand it completely.

Watching all the purposely wasteful spending during the Biden years left a gut feeling it will bite us down the road.

[Capt.Brown]

Maybe we should start building things in this country instead of outsourcing. Canada and Mexico need America a whole lot more than we need them.

[Playa]

A year from now, trade with America will be drastically more fair and many companies will bring their manufacturing back here. He's not bluffing.

You say this like manufacturing here is just the snap of a finger. It’s not. And even if it were that easy, our environmental laws make it **** near impossible to make anything the way it’s made in Asia. What is more likely to occur is manufacturing gets moved to Cambodia, Philippines or some other obscure SE Asian nation. But it’s not coming back to the US.

the tariffs could work, but only if there is an equal or greater tax break to ease the burden of the American people. Otherwise you wind up with a Herbert Hoover style of economy. For those who don’t remember this piece of history, Hoover implemented tariffs and increased takes in 1932. A few years later we experienced the Great Depression