John Maynard Keynes wrote and published his General Theory of Employment, Interest and Money in 1936. In this country, it was first sincerely applied in John F. Kennedy’s administration, when Gardner Ackley was chair of the Council of Economic Advisors.

Our economic recovery is robust and will be gaining momentum. The U.S. Bureau of Economic Analysis reported that GDP was up at an annual rate of 4.3% last quarter. There are many economic indications that make us appear to be on the cusp of a prosperous continuing recovery. 

There is a huge divergence between recent returns of growth and value issues. Usually they are fairly similar, yet currently the difference in average returns between the asset classes is over 25%. The last time the difference was this large was back in 1999 to 2000 before the Internet collapse.

We send our best wishes for the holiday season, and wish that you all had a great Thanksgiving. We expect a good year ahead. Amid some concern, we note that markets have been volatile since the end of September, and also manifest a change in character. Recent activity has evoked more attention than usual. Clearly, there are two lines of basic thought.

Much has changed in the investing landscape since a year ago. Interest rates are higher. US Treasury bills were close to yielding zero a year ago and they are about 5.0% today. The phalanx of other interest rates is also higher, although the yield curve is inverted (short-term rates are greater than longer-term rates).

So where are we now? Both economically and politically it has proven to be a volatile ride over the past year. Despite initial economic uncertainty, we have an improving economy that has largely rebounded. 

This month is probably the largest equity market decline that many investors have ever seen. Many declines grow out of imbalances in the business cycle; some exacerbating or causing tightening in monetary or fiscal policy. Much earlier in the 19th century, a considerable portion were caused by crop failures or financial collapse and panic. This month, declines reflect the negative effects of responses to the Coronavirus pandemic.  

Student loans may be a hindrance in building up retirement plan balances. A 401(k) can also be a powerful tool for creating future wealth. Many millennials may feel burdened by student loans early in their careers. A recent IRS private letter ruling allowed employers to use the 401(k) framework to make “matching” student loan payments.

Markets incorporate, process, and evaluate information.  We are currently living in a time when there is a lot of information to be evaluated.  Market participants note various possible occurrences or trends, and essentially assign a value and probability to each, and then combine it all into current prevailing market prices, which, of course, are always changing because information occurs randomly through time.

A remarkable fiscal stimulus has begun to wash over a collapsing foundation. Markets look ahead. When the epidemic finally ceases, the United States and world equity markets will see a brighter future. Like Wylie Coyote, the U.S. economy has just run over the cliff at the edge of the canyon .

By metrics of unemployment rate, GDP growth rate, and inflation, we are doing okay to fairly well. The new tax law, lessened regulation, and the absence of accelerating inflation have inspired our equity markets to move higher. The economy has continually been growing about 2% per year – which is not dramatic, but is an enduring positive number.

As we hurtle towards the next election, the U.S. economy is continually expanding. There are a few bumps in the road, but the economy also possesses stronger areas. The leading economic indicators are still headed upward. At the moment, there does not appear to be any clear indications