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Caleb Lawrence – KPIG-KPYG Radio – Share the Wealth – February 28, 2017

Ahead of Trumps budget speech this evening stocks fell late morning and enter the final hour with small losses. The consensus is that said budget speech will feature a large boost in military spending and a fairly substantial import tax the proceeds of which will be used to reduce corporate tax rates and perhaps incentivize corporations to repatriate funds and drive domestic production. This was tried in 1934 with the Smoot Hawley Tariff Act, something roundly considered to be a disaster as for every action there is an equal and opposite reaction. The Affordable Care Act is also expected to feature prominently though its repeal is questionable.

The 2nd estimate of 4th quarter 2016 Gross Domestic Product or GDP missed expectations when it came in unchanged at 1.9%. For all of 2016 GDP grew 1.6%, a 4-year low, and a significant decline from the 2.6% seen in 2015 as the economies anemic growth came in below the Fed’s 2% target. Consumer spending and real estate investment advanced, trade along with state and local spending subtracted from the details that were by and large unremarkable.

The January trade gap widened sharply to 69.2 billion as exports fell .4% on a big drop in capital goods exports. Imports advanced 2.3% as consumer goods jumped 4.8% and vehicles increased 2.9%. This report will weigh on first quarter GDP.

The Richmond Fed regional economic index increased 5 points to 17 during February on strength in new orders and employment related components. Strength in the regional Fed indexes should push tomorrows Institute for Supply Management Manufacturing index higher. Agricultural prices jumped 5.7% in December on strong gains in Egg, Poultry, Dairy and Meat Products.

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