The 21st century got off to a good start in terms of consistent consumer prices, no inflation threats, and a stock market that keeps investors happy. But there are signs this fairytale existence is coming to an end. The Feds raised interest rates at the beginning of the year, and another increase is coming in June, according to some reports. Inflation is hitting the two percent government’s yearly projection now, but consumers who feel inflation at the grocery store say prices are going up faster than a SpaceX rocket. And the stock market is acting like some strange algorithm monster that doesn’t reflect the true condition of American businesses.
Mr. Trump wants to keep his promise to increase economic growth and to bring jobs back to the United States, but his approach is creating a perfect storm for some businesses. Putting tariffs on steel and aluminum was a major blunder, according to the farm industry. And now that China is ready to put tariffs on American products, consumers will pay the price for that presidential misstep. Rising interest rates are making business and consumer loans more expensive and buying stocks is not a priority for some investors anymore.
According to a Washington Post article, American consumers will spend more money on necessities this year, and they will pay more money to borrow money to buy big-ticket items like homes and automobiles. And their investment portfolios are not growing as fast as they expected. By the time summer is in full bloom. Americans will realize the days of easy money and steady growth are behind them.
Economists believe the U.S. economy is still strong, but there’s a boom-bust cycle in motion, and America is heading into the bust part of that cycle. Higher interest rates will impact corporate profits even though Trump’s tax break is giving big corporations with assets in other countries an early Christmas gift. Investors are selling stocks and investing in bonds, according to the Investment Company Institute. And the move toward buying more bonds at the expense of buying stocks has some economists worried.
Some economists and many hedge fund investors believe the U.S. and the global economy are heading for another recession. Some investors, like George Soros, think the new recession will cause more damage than the 2008 recession. But not all investor believes a recession is in the works. Those investors are still making big business plans. But other corporate leaders are being cautious because the signs that are surfacing now usually mean something major is going to happen in the financial market.