In response to the 2008–2009 financial crisis, there was substantial intervention by the Federal Reserve (Fed) in the form of low interest rates and asset purchase programs, known as quantitative easing. For the last eight years, this one-sided monetary response has not been adequately complemented by fiscal or legislative measures. This had both intended and unintended consequences.
One result was that this recovery has been characterized by slow growth and a lackluster business environment. Many corporate decision makers were adverse to risk and tighter restrictions on lending did not help matters; thus, there was less enthusiasm for business expansion compared to what many may have expected.
Now that economic indicators are on the rise and the Fed is scaling back emergency policies, there needs to be a decisive fiscal response to support economic growth. Pro-growth legislative policies such as corporate tax cuts, increased government spending, and easing regulatory burdens could help the economy move forward and pick up steam.
In the LPL Research Outlook 2018: Return of the Business Cycle, investors can learn about the new dynamic associated with the welcome return of traditional market-driven forces shaping and propelling economic activity. The private sector can drive that dynamic, but fiscal policy must act as a catalyst to growth rather than a deterrent.
Be on the lookout for this publication—and its complementary suite of collateral—due out at the end of November.