Recap: State of the Union Address and Federal Reserve Statement

There have been a lot of developments since yesterday’s blog post, and I want to take a moment to go over what our elected officials and central bankers have to say about the U.S. economy.

First, President Obama delivered his annual State of the Union Address last night, focusing primarily on how he wants to help the American middle class and bring outsourced jobs back to U.S. soil.

I don’t want to get too much into politics, but I will say that President Obama and I don’t see eye-to-eye on very many things. Judging from how some key conservative players reacted to last night’s speech, it remains to be said how much of his regulatory vision will actually gain traction in Congress.

But, I can appreciate that our President made a few positive statements about the direction of the U.S. economy:

“In the last 22 months, businesses have created more than three million jobs. Last year, they created the most jobs since 2005. American manufacturers are hiring again, creating jobs for the first time since the late 1990s.”

I’ll be the first to agree that the job market in the United States is firming up, and improvements in manufacturing are going to have a noticeable effect on this country’s development.

He also made some positive remarks about the shale boom, which I agree is shaping up to be the future of U.S. energy:

“This country needs an all-out, all-of-the-above strategy that develops every available source of American energy—a strategy that’s cleaner, cheaper, and full of new jobs…The development of natural gas will create jobs and power trucks and factories that are cleaner and cheaper, proving that we don’t have to choose between our environment and our economy.”

It is heartening to see that the President claims to recognize how crucial this resource is to our energy independence. If he can turn these eloquent words into action and refrain from regulating the fracking industry within an inch of its life, I’ll be even happier.

All-in-all, President Obama’s State of the Union Address is a textbook case about why the year of a Presidential election is tremendous for stocks. As the stakes rise higher, candidates start to run around and suck up to the public. Incumbents become more bullish about the state of the economy and newcomers start making promises to encourage voters. I’m sure that we’ll see plenty more of this as we draw closer to November.

In other news, the Federal Reserve has announced that they’re not looking to raise the federal funds rate (the rate which ultimately controls interest rates) until 2014! Despite multiple round of Quantitative Easing, inflation has stayed subdued, so this gives the Fed more leeway in keeping interest rates near bottom. This should encourage investment and keep the dollar low—a one-two punch that will especially benefit multinational companies and encourage job creation in the U.S. This news was enough to reverse this morning’s dip in the markets, and I’m not complaining.

On the whole, this has been an exceptional January for the stock market and we have several other reports coming up. The big one is on Friday when the Department of Commerce will release its advance look at fourth-quarter GDP. Currently, economists expect the U.S. economy to have grown by 3.2% last quarter—a significant uptick from the final reading of 1.8% growth in the third quarter. The economy is increasingly getting back on the right track, and the market is responding!

More Louis Navellier



RSS Feed

Little Book

InvestorPlace Network