Watching the news tickers scroll by can be an exercise in exhaustion. If every story is important, then one might be tempted to conclude that no story is more impactful than any other. While we would not attempt to minimize the deeply personal stories which make up the news cycle, let us consider instead which are likely to have an impact on the immediate economic environment. We are excluding news stories which directly reference economic measures – reports on factory orders, unemployment rates, etc.
Two stories which have an impact:
- Hurricane Harvey & Irma. Storms temper growth and cost billions to rebuild. In this case – due to the gulf coast’s concentration of chemical storage, logistic distribution, and materials processing (particularly refining) – energy prices are already boosted at a time when they ordinarily recede, following the summer travel season.
- Trade threats. The USA and its closest neighbors – Mexico and Canada – have experienced significant economic benefits as a result of NAFTA, but the deal has been under assault from protectionists on both sides of the political spectrum. The past few weeks have seen an expanding number of trade threats from the Trump White House including, but not limited to – existing trading partners of North Korea (which includes global powerhouses like Brazil, Germany, Mexico, and China), and allies like South Korea and Japan. NAFTA is already undergoing its second round of talks, with very limited progress given the verbal hostilities from the administration. It might not take a big error – a new tariff, border adjustment tax, or even just a poorly timed twitter rant – to kick start a downward spiral and stunt the economy.
Two stories which have no immediate impact:
- North Korea’s provocations are alarming and they are happy to remind the world they are prepared to generate a catastrophic outcome. In the near term, there aren’t a lot of likely resolutions other than maintenance of the uncomfortable status quo despite the saber-rattling from Pyongyang.
- DACA being rescinded. There are about 800 thousand immigrants shielded from deportation through DACA, but no actions are imminent. The 6 month delay is a clear signal that the White House expects Congress to deal with the question through legislation instead of an executive order, thus satisfying hardliners in their camp while potential avoiding the consequences of immediate deportation.