USA Balancing Act

Remember those big scary headlines and fear based newsletters about US deficits bringing on the end of the world as we know it?

Well things are changing. The US is swinging back on a trend basis to sustained government surpluses. There will continue to be the odd fiscal deficit at times on a monthly basis, but the trend is certainly positive.

When everyone was saying that the US economy would collapse under the weight of printing money, we were saying that a resurgent economy would deliver greater revenue than even the government itself was projecting. Which is exactly what has happened. Our forecast that this would lead to fiscal stabilisation, as it would be accompanied by not great spending restraint, but at least some, has proven correct.

Things are never perfect, so the bears will always have some issue to falsely trumpet, but the reality is that the global balance of positive and negatives, well, has the positives way ahead and extending their lead!

As for the fiscal situation, this long term chart below clearly shows significant improvement since 2009. A steady trend toward the positive. Quite a remarkable outcome, that again we saw as likely, while the fearful media never saw it coming.

US Un-employment: As I keep saying, the US is at FULL employment levels.

Yet whenever there is the slightest down-tick, the bears try to panic the market? Then, the next data release, confirms this was only because the US is hitting its head on the ceiling of amazingly full employment. With only minimal bounces off that ceiling from time to time.

In fact, there have only been five periods in the last half century where un-employment has been this low. This, when the workforce is generally more mobile, meaning more people temporarily out of work and switching jobs, even careers.

Therefore the reality of US employment, is that it is BETTER than even the data suggests.

As the US, China, and European economies continue to strengthen through this year, in keeping with an incredibly strong and powerful outlook for many years to come, we can only see stocks, property and asset prices in general, moving higher.

This is why, but barely mentioned in a media which prefers a fearful collapse story, the Dow Jones stock market index in the USA, just hit a new all-time record high. Along with the broader S&P500 Index.

These are exactly the kind of numbers and run of data we have been forecasting all along. We keep saying it doesn’t get any better than this.

If the USA can balance its budget, why can’t Australia?

It is very clear that Australia’s performance is really lagging the rest of the world. Australia will however benefit from a return of some political stability, and the ever increasing positive external pressures on all aspects of our economy. China remains a powerhouse and its economy is in fact accelerating.

The rest of the world continues to improve toward economic boom type levels. This will continue to generate a favourable environment for Australian property price gains.

Clifford Bennett