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What the U.S. economy could do better in 2020

Meredith Garretson Jan 1, 2020
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A lot of people make New Year’s resolutions, but what about resolutions for a country? This year we thought we would do something a little different and ask some of the economic experts who share their insights all year round to answer the question: If the U.S. economy were a person, what New Year’s resolution do you wish they would make? Below are their answers.

David Kelly, chief global strategist, JP Morgan Funds:

If the economy were a person I would say: Recognize that although you’ve done well, you aren’t quite as special as the stock market seems to think you are, and lay off the sugar of monetary and fiscal stimulus and instead focus on building your long-term economic fitness through reducing trade barriers, encouraging the immigration of skilled workers and giving businesses the confidence to invest in new technology.

Diane Swonk, chief economist at the tax and advisory firm Grant Thornton:

I would say pace yourself and keep us in a marathon of expansion. I would also say to look at 2020 as a more inclusive year, involving more people and distributing the benefits an economic expansion more evenly.

Susan Schmidt, head of U.S. equities at Aviva Investors:

As if the U.S. economy were speaking: “I’m going to have confidence and not let the naysayers get me down, and I won’t overpromise and underdeliver. And I’ll go to the gym more.”

Jeffrey C. Cleveland, chief economist, Payden & Rygel Investment Management:

Well, they say that “50 is the new 30.” Perhaps the same adage also applies to the economy?

The U.S. economy is now in its 11th year of expansion, surpassing the record-long 1990s business cycle and defying the constant string of negative pronouncements by bearish prognosticators (“the end is near!” crowd.)

And, to be fair, for most of recorded history, business cycles were far shorter and recessions more frequent. The 2010s marked the first decade on record in which a recession did not begin.

The lesson: Age alone does not dictate the business cycle’s length. Age is a mere number. Instead, business cycles end when excesses of the expansion are revealed. Often returns did not meet exuberant investor expectations (think: dot coms in the ’90s, residential real estate in the 2000s), and/or policymakers removed the punch bowl.

Today, with few signs of excess, the current economic expansion may continue well into the 2020s.

And perhaps that’s the secret to longevity, in the business cycle and otherwise? First, avoid excess, such as too much debt built up in a particular sector, depending on future returns for repayment. Second, enjoy everything in moderation, e.g., avoid too much inflation. And, third, avoid unnecessary risks, such as policy errors like central banks “tightening” too much or politicians escalating trade wars. And, in return, receive the chance to live a longer economic life?

If those resolutions help prolong the business cycle, investors and the average worker alike will benefit.

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