At the beginning of the year, I would say the following to anybody who would listen: “if you liked 2011, you are going to love 2012.” While the investment markets have been a little better than last year, the economy is about the same, as is Washington. Very little is as we want it to be; however, things aren’t as bad as we really fear, primarily because we fear the worst.
Guess what I am going say this year? That is right: “if you liked 2012, you are going to love 2013.” After all, what has fundamentally changed? I would venture not much, and you would be hard pressed to find many industry experts who feel terribly differently.
Sure, you might see an occasional Pollyanna on the television, and a few Chicken Littles to boot. However, where the rubber meets the road, we are still recovering from a major financial crisis; we still have significant fiscal problems in Washington; we are still restructuring our labor markets and technologies to better compete in the global economy; we still have an aging, and therefore more risk averse, population, and the sun is still coming up in the East.
In 1686, Sir Isaac Newton published his Laws of Motion. The first one, also known as the law of inertia, reads: “Every object persists in its state of rest or uniform motion in a straight line unless it is compelled to change that state by forces impressed on it.” In other words, if nothing changes, well, nothing changes. As it is in physics, so it is in economics.
Now, some people would say the turmoil surrounding the so-called fiscal cliff would be a game changer, and they might be right to some degree. However, the debate on taxes is purely political, and has very little to do with economics. Further, the discussion on spending cuts is misleading. The two parties are trying to come to an agreement to reduce future planned deficit spending, and not actual, absolute cuts. You could call this proposed cuts in relative spending in the future, as opposed to actual cuts in present expenditures.
With that said, I can’t look any of our clients in the eye and tell them what they want to hear; that the economy is poised for rapid growth in the near-term. On the flipside, I can’t tell them we are about to drop off the precipice either. Our economy is currently neither fish nor fowl, whether we like it or not, and most of our clients don’t like it one little bit.
Let’s face it; while people always want good news, the best case scenario if you will, they want to be able to plan for the worst case or Doomsday. What happens when the truth is somewhere in the middle, as it usually is, and that truth is as mediocre as is possible? What if you knew in August your team was going to go 6-6 in the upcoming season, but you didn’t know which games it would win? How would that strike you, in an ordinary year?
If you love the type of thing, welcome to 2013! For the rest of us, 2013 is going to feel a lot like 2012.
AS PREVIOUSLY PUBLISHED IN THE MONTGOMERY ADVERTISER 12/28/2012
The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees.