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First, the New U.S. Administration is Going to Focus on U.S. GDP Growth and U.S. Jobs.

With that in mind, I want to focus on the long 65-year march of women into the active labor force. U.S. Bureau of Labor statistics show the build. In 1950, 32% of working age women worked outside the home, earning cash incomes. That number peaked at 60% in the year 2000. Today, it is near 56%. A downturn in women’s labor force participation came in the 2008 crisis. I find that more than interesting. As the U.S. economy struggles to get more than +2% annual growth out of this business cycle, I think one underlying force holding U.S. growth back is the attrition of women in the active labor force. Once women left the office for raising small children at home, in 2008, many never came back. They might have been forced by poor circumstances to do that, at first, but now the trend is established, and friends and neighbors have followed suit.The lower presence of 2 cash incomes in households restrains final demand, and hence GDP growth.

Second, Past Presidential Election Cycles Warn of a 2018 Bear Market

Another post-election issue I would like to raise -- a prediction past Presidential election cycles makes for U.S. stock downturns and recessions.  The Philadelphia Fed Survey of Professional Forecasters has a 10% chance of a recession in Q1-2017 turn into a 20% chance by the end of 2017.

In data from 1945 to 2004 provided by Pepperdine Graziadio School of Business Review,

  • 3 of 16 bear market lows occurred in year 1 of a Presidential term, 
  • 12 bear markets hit in year two, 
  • One hit in year three, and 
  • None happened in year four (the election year). 

Keep the above in mind. The implication-- a bear market may well hit in 2018.

Finally, Republican Optimism is Driving this Santa Claus rally…not policy.

Jim O’Sullivan is the respected Chief Economist at High Frequency Economics. He tweeted out a graph showing your party affiliation matters to how good you feel about a Presidential cycle. Before the election, Democrats --with Obama in the Presidency— felt better. With Trump elected, the Republicans feel much, much better.

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