“Don’t Fear The Sequester”
- Posted by ToddSullivan
- on February 20th, 2013
There have been persistent predictions that the upcoming “Sequester” will be disastrous for the US economy with some ”millions” laid-off. This I think is only if there are political decisions to target specific areas of Federal spending such that this type of disaster can be made to maximize the most negative outcome. Brian Wesbury counters this with reasoned commentary which I wanted to call to your attention. I think his views are more centered, far less horrific and worth reading. I have excerpted a quote below Brian Wesbury-”Don’t Fear the Sequester“:
“According to the Congressional Budget Office, if the sequester goes into effect as scheduled, it will reduce spending from its current path by $43 billion over the last seven months of this fiscal year – March to September. While this is 2% of all federal spending over that timeframe, it’s only 0.5% of GDP and it’s not an actual cut in the level of spending.”
All the indications which I see from economic trends indicate we are smack in the middle of an expanding economy with decent increases in employment. Importantly, the lagging sectors of our GDP, Residential&Commercial Construction, are beginning to add their substantial contributions to employment and spending.
The SP500 ($SPY) has moved higher by over 130% since the March 2009 lows in line with economic recovery/expansion as it has in the past. I see little to fear if one is a long term investor.
The best advice I can offer is that investors should consider adding exposure to equities. Rising Treasury rates are typical of bond investors gaining confidence to shift towards equity to achieve higher returns.*
Now, I will grant that Westbury is a bit of an “uber bull”. But, even at that one has to admit he has been one of the few consistently positive voices over the past three years. That puts him in a very small minority of people who have been right throughout this recovery. While in the current mindset of things saying the economy will “continue to grudgingly improve” will not get you TV time (it is much more boring that saying “we are all doomed”) it has been the exact right thing to say.
We also have to consider Gov’t agencies have been preparing for sequester for some so the immediate impact, should it come will be muted.
I am coming to the opinion that this is another event that is more “new noise” than the actual economic devastation that will assuredly be predicted.
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Todd's investing strategy is essentially long with the rare short. He seeks to buy undervalued issues with an upcoming catalyst that will help them realized.... More »
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