What’s Driving the Economy?

As the U.S. economy entered the fall enjoying its ninth year of healthy growth, analysts watch to determine its continuing trajectory. According to the Conference Board, in an Oct. 10 update, its Consumer Confidence Index remained at the highest level since 2000, and its CEO Confidence Index declined in the third quarter but remained solidly in positive territory.

The beginning of the year saw a strong start. According to Thomson Reuters, S&P 500 companies reported a more than 25 percent average increase in first-quarter after-tax earnings over the same period in 2017. Furthermore, S&P companies increased capital expenditures on factories, equipment and other goods to the tune of nearly $167 billion in the first quarter of this year alone. This represents the fastest pace in seven years. One of the primary sectors investing heavily in this expansion mode is technology, led by industry giants Google, Apple and Microsoft.

Spending on the private side is further complemented by increases in this year’s federal spending budget. Combined, these revenues are projected to increase fiscal stimulus by approximately $285 billion by year’s end.

While events such as the recent midterm elections can create uncertainty in the short term, history points to their long-term effects being more minimal. Since 1946, the S&P 500 hasn’t declined in the 12 months following midterm elections and has seen an average fourth-quarter return of 7.9 percent in midterm election years, according to one CEO’s research.



1 The Conference Board. Oct. 10, 2018. “The Conference Board Economic Forecast for the U.S. Economy.” Accessed Oct. 11, 2018.

2 Darrel Spence and Jared Franz. Capital Group. June 20, 2018. “U.S. Outlook: Game changers helping power U.S. economy.” Accessed Oct. 4, 2018.

3 Ibid.

4 Anna-Louise Jackson. Nerdwallet.com Sept. 28, 2018. “Stock Market Outlook: Lessons of the Fall.” Accessed Oct. 11, 2018.


Money Saving Tips

Assessing Infrastructure

While among the most bipartisan issues in Washington today, infrastructure initiatives continue to be overshadowed by other government priorities such as trade and immigration. Nonetheless, the nation’s transportation network alone – roads, bridges, waterways, railroads, airports – represents 9 percent of the United States’ gross domestic product (GDP).

There is widespread consensus that significant investment is needed to repair, upgrade and create new infrastructure projects throughout the country. However, with a growing deficit there is little incentive to devote a tremendous amount of the federal budget to this endeavor. At the same time, since the Great Recession, the booming private sector has shown less than overwhelming interest in funding public infrastructure projects either wholly or in partnership with the government.

In response, researchers from the Penn Wharton Public Policy Initiative have recommended several policy changes, including suggesting that the U.S. government subsidize low-interest, long-term loans to replace and maintain deteriorating infrastructure. For example, subsidizing a $5 million project via a 30-year loan at a 3 percent interest rate yields an annual payment of around $250,000.

The Penn Wharton Public Policy Initiative also suggested policymakers amend the Stafford Disaster Relief and Emergency Assistance Act of 1988, which authorizes federal disaster response activities. It recommends changing the Act to require an initial deductible for infrastructure projects precipitated by a disaster, which could be met through credit by having mitigation procedures in place.

As for private investment or public-private partnerships to fund infrastructure projects, there appears to be less interest than before the recession due to a simple return on investment calculation. Many companies do not see the viability of investing in such projects in today’s ever-advancing economy.

For example, why build a brand new airport, that may take 50 years to fund, if that airport could become obsolete in 20 years due to new technology, such as video-conferencing, reducing air travel? In addition, research shows that U.S. corporations are investing more in workforce initiatives rather than tangible assets. They are seeking ways to make human capital more productive, from training to investing in automated technology.

1 Knowledge@Wharton. Sept. 4, 2018. “Four Policy Changes That Can Rescue U.S. Infrastructure.” Accessed Oct. 5, 2018.

2 Ibid.

3 Knowledge@Wharton. Sept. 27, 2018. “Why Private Investment in Public Infrastructure Is Declining.” Accessed Oct. 4, 2018.


Planning Tip

The Debate Over Quarterly Earnings Reporting

Should companies be required to report earnings every quarter, a transparency initiative that has been in effect since the 1930s, or just twice yearly? In August, President Trump asked the Securities and Exchange Commission (SEC) to study the impact of moving to biannual reports.

Business leaders have weighed in on both sides of the issue. The following are a few potential pros and cons that have been identified:


  • Re-orient companies to longer-term planning
  • Save on reporting costs
  • Reduce share buyback strategies than can artificially boost stock prices
  • Align with Europe’s system of financial reporting (although many European companies still continue to put out quarterly reports)


  • Reduce transparency to investors
  • Increase temptation to cover up missteps
  • Increase potential for insider trading

It remains to be seen where the SEC and the administration will land – President Trump’s request was issued in an August tweet. Under current law, such a change would be largely at the SEC’s discretion; and it would likely involve a lengthy process of review if it were to move forward.

1 Knowledge@Wharton. Aug. 27, 2018. “Should Companies Abandon Quarterly Earnings Reports?” Accessed Oct. 4, 2018.

2  Pete Schroeder. Reuters. Aug. 17, 2018. “It will be tough for Trump’s SEC to overhaul reporting rules.” Accessed Oct. 12, 2018.


Content prepared by Kara Stefan Communications.


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