Fiscal Policy Stimulus Waning

3103Fiscal Policy Stimulus Waning

Jeffrey Viksjo CFA, CFP®

U.S. GDP growth turned higher in 2018 to ~3%, but will almost certainly slow in 2019 to 2.5% or below. One reason is the diminishing impact of fiscal policy stimulus, including the tax cut. The chart below shows the contribution of fiscal policy to GDP growth (both taxes and spending); last year, fiscal policy added nearly 80bps to growth, while this year it will add just 20bps.


In addition, the stock market sell-off has not helped. While changing economic fundamentals did not drive the sell-off (data remains steady), the sell-off will likely change economic fundamentals going forward. For one measure, Small Business confidence has fallen significantly since the stock market correction, indicating businesses are now less likely to invest in capital expenditures going forward amidst the uncertainty.


Source: The Wall Street Journal



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Ogorek Wealth Management, LLC

Ogorek Wealth Management, LLC