In 1992, James Carville coined the phrase “It’s The Economy, Stupid”. It helped Bill Clinton secure the presidency. It was meant to be an internal message, but quickly spread and was impactful during a time when the economy was in a recession.
In 2019, the consumer is keeping the economy going, especially given that they are approximately 70% of the economy. On today’s Trey Ware Show, Karl discussed the positive elements going on with the American consumer and the impact on the economy and the stock market.
Trey Ware: Time to talk with Karl Eggerss, CreatingRicherLives.com joining me now here on KTSA. Couple of news things that happened over the weekend and we’ll get into the Chinese deal here in a minute. According to new Census Bureau data from America’s middle class. Research, they have found gigantic income gains for the middle-class under Donald Trump. The median or average family income has seen a gain of $5,000 since Trump came into office up from 61,000 to 65,976. Under George W. Bush, the middle class gained $400 in eight years. And under Barack Obama it was $1,000. Home Depot and Lowe’s showing huge record sales surges and the tax cut added an average $2,500 to a typical family of four’s after-tax income. So you got that.
And then on Friday, you got a big pop because the President and China announced an agreement. They haven’t signed the agreement yet, but they announced an agreement in principle. China is going to raise its agricultural purchases of soy beans and stuff like that up to about 40 to 50 billion. That’s up from 8 billion. That’s actually huge. And the President says they’re going to buy more land and more tractors. Phase two negotiations expected to begin immediately after the first agreement is signed and Wall Street loved that news. Good morning, Karl.
Karl Eggerss: Hey Trey, how are you doing?
Trey Ware: Doing very well, man. What do you think about all that?
Karl Eggerss: Well, it was what we were looking for, which is at the very least a de-escalation, right? We didn’t want this to ramp up to more tariffs more back and forth. We had a real big ping pong match last week. We heard a lot of new things coming out saying, “Hey, they want this, they’re mad at this. Trump wanted this.” And then at the end of the day, we did get that agreement, in principle at least. So what we need now is obviously there’s probably a few more talks going on. In fact, you saw that come out this morning that China still wants us to talk a little bit more, work out some more details, but I think the de-escalation is what the stock market was looking for. It’s what we were looking for, that we don’t want this to get any worse. Let’s deal with each other and make this a deal. So that was very encouraging.
The other thing I wanted to mention is something you said earlier about what’s going on with people and their raises and their net worth and everything else. That’s really important because not only do we have the stock market near an all time high, we also have people starting to get raises for the first time in a long time. And so you’re seeing that each and every month when this jobs report comes out, there’s a wage number in there that says how much are people, how much are their wages going up. And they’re starting to go up a little bit. And that is a really encouraging sign because as I’ve been telling you for months, if the consumer’s in good shape, then probably your 401k is going to be in good shape and the economy’s in good shape because people are still spending. And when do they spend? When they get raises. And that is happening right now, which is very, very encouraging.
Trey Ware: Well and too, if they get this deal done with China, which they are working on getting done and they’re going from buying $8 billion in agricultural products up to $40 and $50 billion of agricultural products, plus they just got the deal done with Japan last week or two weeks ago and we’re still waiting for Nancy Pelosi to get off her butt and do something about the new NAFTA, NAFTA II or whatever they’re going to call this thing. Get that done and approved. And people are going to start to see some real money flowing into their bank accounts all across all income sectors here in the United States. Got to buy more tractors, got to buy more land year. There’s going to be free and open trade all through the Americas. I think all this is really, really good news at a time when the President needs some good news rolling into next year’s reelection campaign.
Karl Eggerss: Well look, money flows like water. And so right now we have these agreements that are in principle, we need to get them done because we want to see economies flowing in Mexico, coming back to United States. We’re talking trains, we’re talking rails, everything else. And when you have that flowing freely and with China, then you see the economy really take off. Right now the uncertainty is really the main thing that has caused the stock market to be a little bumpy in the last 18 months, has been what do we do if we’re a manufacturer, if we’re a CEO, if we’re an employee, am I going to have a job? What do we do? And this will solve a lot of that. And this will answer a lot of questions. And when that happens, I do think the economy will re-accelerate. Absolutely.
Trey Ware: Yeah, no doubt about it. Karl Eggerss, CreatingRicherLives.com. Thank you, Karl.