Seven Critical Things to Watch For in Early 2016
If things go right, by the middle of 2016 we can break out the Champagne. But until then, there are seven things that keep me awake at night. If anything on this list goes seriously wrong, it means a tougher slog through the year. And if most things go wrong, then it’s time to hunker down in your foxhole.
The Fed and Rates
Do they raise rates, and if so, how much and how fast?
The good: Raising says the economy is really on track.
The bad: Raises borrowing costs and strengthens U.S. dollar vs. foreign currencies, which will slow exports.
The Chinese say they are at 6.9% GDP (which no one believes), but will they officially admit to lower growth, and if so, where?
The good: Slower Chinese growth keeps commodities low, which is good for consumers of home heating oil and builders looking for cheaper construction inputs.
The bad: Less trade and lower yuan will hurt our trading partners that supply China with commodities, as well as our own businesses that trade with China.
ISIS and Terror
Do we and our allies cripple their command and control, including online activities, wiping out their contacts with terror cells and their Syria/Iraq military ability?
The good: Success would mean a much safer world and little economic disruption.
The bad: Failure could lead to more Paris-type attacks, downed jetliners, ongoing threats to safety, and potentially severe economic disruptions.
Connecticut’s Fiscal Situation
Do we fix the immediate budget problems and begin to address long-term systemic budget issues? Can Connecticut avoid more tax increases and possibly get business tax rollbacks?
The good: A real fix means a big boost to business confidence and investment.
The bad: If we don’t get this under control, we could see an acceleration of investment, wealth, and business moving to other areas.
Do we see continued weakness in oil prices, perhaps to $20 a barrel?
The good: Consumers (especially here) see real savings, stimulating domestic spending.
The bad: Stock market jitters, weaker trade overseas, and damage to domestic oil producers and companies that service them.
Is 2016 a noticeably better year for housing in Connecticut?
The good: If yes, housing provides a real economic stimulus, leading to growth in many businesses and substantial tax revenues.
The bad: If we’ve missed an opportunity for housing recovery, related industries will suffer.
Will we see an average monthly gain of 225,000 U.S. jobs and 2,000 Connecticut jobs?
The good: Hitting or exceeding those numbers is evidence of a recovering economy and business on the upswing.
The bad: If we miss those job growth targets by a substantial margin (say, lagging by half or a third), then we know businesses and the economy are in trouble.
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