We last wrote that the economy seems to be on a stable and moderate growth path. This remains the case despite the recent volatility in the markets caused by political pronouncements of fairly extreme upcoming policies. In the past I have repeatedly said that “politics” generally have little effect on the economy because the economy is vast and relatively immovable in the short term. Policy changes have a greater impact on the markets which tend to be very excitable. But, ill advised political policies tend to be self correcting over time as they morph into beneficial actions that positively affect the economy based on economics and real time feedback as the economy responds.

Having said that, the markets have been very volatile in reacting to the President’s policy announcements regarding trade and his envisaged role of government. His relatively extreme initial views have been modified and normalized due in part to reactions and feedback from the markets, his constituency and when the Courts curtailed some of his plans based on various legalities. It is not always bad to shake things up as long as one can gravitate towards positive reforms.