Interview with Brian Wesbury: Part 2
Today I’m back to share part two of my interview with economist Brian Wesbury with First Trust Portfolios. For the conclusion of our discussion, we talked about his opinions on our current economic recovery.
Today I'm brining you the conclusion to my interview with First Trust Portfolio's Chief Economist Brian Wesbury.
For the first question of the second half of our interview, I asked Brian if he believes we’re currently in a secular bull market. “I absolutely do,” he answered. He says it all started in 2009 when we changed mark-to-market accounting, which ended the financial crisis.
A lot of people think the government saved us from this crisis, but Brian says this wasn’t the case. “I believe the real driving force behind this recovery is not the government, it’s not quantitative easing [...] it’s not what Congress is doing [...] what’s really driving it is entrepreneurship,” says Brian.
According to him, innovations have really changed the game. He used the example of fracking. Nine years ago, it took 70 days to frack a well. Now, it’s taking just seven to 10 days. It’s this amazing increase technology, in general, that has been driving our markets forward.
You don’t have to be paying much attention to things to hear some doom-and-gloom story on any given day. According to Brian, the time to worry is when everyone starts feeling overly confident in the market.
Personally, clients tell me all the time how worried they are about the future of our economy. They want to know if there’s any reason to believe that things will go south anytime soon. So, I asked Brian what his thoughts were, and he told me this: “There are always four threats to prosperity.” The first is Federal Reserve policy.
When the Fed tightens up its restrictions, it can create a panic. We all know the Fed is now starting to sell bonds from their portfolio, but the good news is that they’re going slowly. For that reason, Brian says there is no reason to worry about this first point.
The second threat would be a tax hike. But currently, we’re talking about tax cuts—not tax hikes.
The third potential threat is trade war protectionism, and this is one that Brian is slightly concerned about. “President Trump has banged the drums for tariffs and things like that. But so far, we’ve avoided that,” says Brian.
Fourth is the threat of government spending and regulation. The bigger the government gets and the more that it regulates, the harder it becomes for the economy to grow. But because we’ve already gotten rid of 800 federal regulations this year and federal government employment is going down, Brian says that he isn’t worried about this as a potential threat.
He also says that he believes it will take an additional two years for the Fed to increase interest rates. Adding those two years into our current eight-year recovery, this will be the longest economic recovery in US history.
So, what about tax reform? Brian says there are currently big plans for tax reforms, but he’s skeptical of their practicality. “We will have corporate tax cuts,” Brian told me. However, he does believe that the personal side of things may, unfortunately, be left on the cutting room floor. Nevertheless, the corporate tax cuts may help bring investment back to the United States, which is great news.
If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.
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