Looking Four Years into the Future
I have to share a few thoughts on what the next four years may bring now that the president has been reelected. For this, I want to present my friend and fellow Eagle Publishing colleague Nicholas Vardy, who recently provided what I thought, was quite a brilliant analysis of what things might look like by 2016.
According to Vardy, who incidentally attended Harvard Law School at the same time as President Obama, the country faces the following uncomfortable outcomes during the next four years. Here are a few of the highlights from Vardy:
Economic growth averages a “new normal” rate of 2%; U.S. GDP in 2016 will be just $16.2 trillion, a tiny bit higher than the $15 trillion of today. The United States drops from seventh to 18th in the annual Global Competitiveness report, after falling from first in 2008 to seventh in 2012.
Our national debt hits $20 trillion by 2016, with the Debt/GDP ration surging to 123% of GDP (the current ratio in Italy). S&P downgrades U.S. government debt in 2013 from its current single “AA+” to “AA-,” the same rating as Japan.
Vardy goes on to predict that taxes are going to rise across the board to pay for exploding government social programs and, of course, there will be a disproportionate increase in taxes on higher-income earners. As for employment, we are likely to see the headline rate unemployment remain in the 7-8% range until the president leaves office. There also likely will be an increase in “part-time” and “contract” workers, as employers take steps to skirt the costs associated with Obamacare.
As for the stock market, Vardy speculates that the S&P 500 essentially will trade around the same levels as it is trading today by the end of the president’s second term. This prediction is troubling, as it means that buy-and-hold investors could be faced with four years of essentially dead money in their stock holdings. That’s not a very appealing thought, nor is it something any of us want to experience.
Jim Woods is a 30-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor.
His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. Read more about Jim Woods.
