A bullish, colorful market forecast

We’ve become accustomed to anti-government conservatives here in Connecticut trashing the economic future, saying the $100 billion, more or less, in underand unfunded long-term liabilities will doom any chance of growth.

Not so on the national scene, and on Tuesday evening, a Connecticut audience of financial analysts heard from one of the most famously bullish Wall Street strategists.

Brian S. Wesbury, chief economist of First Trust Advisors LP, not only didn’t disappoint — he reveled in his upbeat view of the equity markets for 2019, while trashing government intrusion.

Recession in 2020, as predicted by such notables as Ray Dalio of Bridgewater Associates and Mark Zandi of Moody’s Analytics? Nonsense, a very colorful Wesbury insisted.

That little market swoon we saw at the end of 2018? Not a bear market, Wesbury insisted, just a correction.

“True bear markets happen under recessions,” he said to about 600 people at the Chartered Financial Analysts Society Hartford forecast dinner, including many from shoreline towns. “The market will continue to grow because productivity and efficiency will continue to grow.”

Wesbury, whose firm has $120 billion under management, took aim at the notion that the growth cycle, which will reach 10 years in June for the economy as a whole and in March for the stock markets, is not only petering out, but will devolve to a deep recession — because it has been artificially propped up by fiscal and monetary policy.

And of course, being a good conservative, he blamed the media, especially CNBC.

“This idea that we are going to have a 2008 is nowhere near right,” he said. “There are a whole group in the media, what we call the pouting pundits of pessimism.”

For those of you who missed the Nixon-Agnew administration, that’s a play on disgraced former Vice President Spiro T. Agnew’s line about “nattering nabobs of negativism.”

Many in the audience agreed with Wesbury, who did not cite a specific percentage gain for the S&P 500 or the Dow, and did caution, “I like stocks, I do not like bonds. If there’s one bubble in our economy, it’s in bonds because of inflation.”

The optimism comes from a belief that companies are in fact investing in productive capacity, contrary to a more pessimistic

view, but the investments cost less. “How much does it cost to write an app? It’s like 10 cases of Red Bull, 13 pizzas and you’ve got an app,” he quipped.

OK, so he forgot the Lyft costs, but he added, referring to the previous two Federal Reserve chiefs, “I actually think Ben Bernanke and Janet Yellen think the cloud rains on them.”

The pessimistic argument about the markets, aside from the simple laws of physics — what goes up must come down — is that we’re seeing the inevitable result of the end of so-called quantitative easing, the Federal Reserve policy of keeing interest rates artificially low, buying huge volumes of Treasury debt.

That’s not what caused stocks to rise, he argued with a series of charts, including one that showed the banking system still has more

than $1 trillion in excess reserves. Hey, the Chicago Black Hawks won the Stanley Cup three times in recent years, all when quantitative easing tapered off.

“Do you believe in this causation? Of course you don’t,” Wesbury said.

He made fun of CNBC’s economics guy, Steve Liesman, who’s fearful that we will have seen declining U.S. growth in 2018, if and when the federal government shutdown brings the Commerce Department back to work.

Wesbury attacked that argument with charts showing more than $1 trillion of excess reserves still in the banking system.

So, what drove the markets all those years of gains? Corporate profits, of course, and Wesbury sees them continuing based on the Republicans’ lower corporate tax rates, and based on advancements that aren’t as costly as they once were, even if Fed policy leaves quantitative easing in the distant past by raising rates another tick or two in 2019.

“QE never fracked a well, QE never wrote an app. QE didn’t invent the iPhone .... It didn’t crack the genome,” he said,. . It didn’t do any of that ... it is an amazing country we live in.”

Like most other market strategists, Wesbury would favor a freer trade regime than what we’re seeing from President Donald Trump; he’s in the Reagan camp. But he said Trump is winning the trade war by forcing China and other countries to bring their tariffs down. Unreported in the media, he said, is that China’s average tariff fell from 9.8 percent to 7.6 percent and could drop below 4 percent.

“We’re winning these battles. We’re taking away their subsidy and we’re forcing them to grow up,” Wesbury said. “When I look at our world today, it’s no wonder everybody is mad at us and it’s causing consternation, but we’re winning.”

Dougas Cote, chief market

strategist at Voya Investment Management, in Windsor and New York, was the CFA Society Hartford main speaker two years ago, and said then that Trump would boost markets. He’s sticking with that, referring Tuesday night to his 2019 forecast, “The Storm Before the Calm.”

”Back up the truck, I’m a buyer,” said Cote, who predicted between zero and two more rate hikes in 2019 by the Fed.

The real government bashing started when I asked Wesbury whether unfunded health and retirement liabilities, combined with baby boomers’ massive retirements, would drag down the economy.

Debt, like profits, often hits a record high, he said. Not to worry, the United States still has $300 trillion in private assets. The government blundered by creating the Troubled Asset Relief Program, or TARP, which bailed out the banks, he asserted.

”What it said was that without

government we can’t save ourselves,” he said. “Republicans were put on Earth to cut spending, cut taxes and defend free markets, and if they don’t, then what’s left? Greece, Puerto Rico and Illinois.”

The Connecticut audience laughed. “Don’t laugh too hard, you’re not far behind,” he said.

Bu what about those pensions? I pressed.

“I promise you, we’re going to break those promises,” Wesbury said, arguing that breaking union pension promises is no more immoral than sticking him and his descendants with countless billions in debt.

Forgive me, but as I write this, on a day when an apartment in New York sold for a housing record of $238 million, I’m thinking Wesbury might be right about the markets. But he’s wrong about government and its promises. That’s a strength, not a weakness.