Author: Patrick McFadden, M2 Global
Covestor model: M2 Global
The ECRI US weekly leading index again shows growth expectations weakening. However, inflation continues to creep up. The US economy is teetering on the edge of a cliff with mainstream analysts predicting lower than 2 percent growth, with a fiscal cliff and debt ceiling limit all headed toward a presidential election.
It seems the best-case scenario right now is a Mitt Romney win in the presidential election while the tax system outlook remains stable thereby counteracting the resulting fiscal austerity. That said, the Clinton surplus looks good from our current vantage point.
Will Romney checkmate the U.S. Federal Reserve? Will he help backstop Europe if a bank run destroys Italian credit creation? Will slower growth in China and the emerging economies prevent stagflation and allow the US, running low nominal growth, to remain above water on a real growth basis?
Whatever the results, I hope the elections allow the government to function in a manner that gives us a sound tax and spending plan, a plan geared to long-term growth and stability. Right now, we are standing on the edge, unable to move, and this is a very precarious place to be given what stalks us.