Here's the annualized US economic growth rate over last 26 years
One can clearly see that US trend growth rate is now 2% which clearly was near 4% in the 90s. Donald Trump wants to accelerate the economy and grow at 3 to 4%. But the big question: Can US economy grow at 3 to 4%? This is how Janet Yellen responded to this question in front of Senate Banking Intelligence Committee:
“I’d love to see it”
And lots of folks thought she made a sarcastic remark but no because she knows it's very difficult. She knows the maths.
Mathematically - there are only two ways you can grow the GDP-
1. Expand the Labour force and/or
2. Increase the productivity dramatically.
Both are almost impossible to achieve right now. US society is aging pretty fast and there is no expansion in Labour force. The labor force has grown by less than 0.5% per year over the past decade and with negative noise on immigration, there is just no trigger here. Productivity situation is no different. In the last five years, productivity growth has averaged a half percent. The last decade, something like 1.1 percent. In order to grow economy at 3 to 4%, the productivity growth would need to rise to something over 2% which looks next to impossible right now
Read more: How stocks try to climb Mount Everest?
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers