Taylor Swift’s mega hit Shake It Off is a decade old this year. Over the course of ten years, the songwriter-musician-performer has gone from sensation to superstar. Her net worth, too, has gone from sensational to off the charts.
In addition to the financial benefits that have accrued to her personally, the demand created by The Eras Tour (149 concerts over 20 months spanning 5 continents) has had a meaningful economic impact. Swiftonomics refers to Taylor’s economic influence.
For example (according to Investopedia) ahead of her six concerts in Los Angeles, the California Center for Jobs & the Economy estimated the tour would result in a $320 million increase to the LA County GDP.
The Center also expected The Eras Tour would increase area employment by 3,300 and local earnings by $160 million.
Despite (or more likely because of) her success, there are haters. Imagine!
Like Taylor Swift, the US economy has been creating jobs and facilitating profits for companies since the last downturn in 2020.
The most recent jobs report, released by the Labor Department on October 4, showed US employers added more than a quarter million jobs in September, “blowing past expectations” according to the Wall Street Journal.
Nonetheless, the US economy still has its “haters”, too.
Bill Dudley, a well-respected economist and former head of the Federal Reserve Bank of New York, had been one of the haters, but has recently shaken off his negative outlook.
Dudley wrote an editorial published by Bloomberg on October 3, where he stated: “I’ve been too pessimistic about the risks of a so-called hard landing (recession) for the US economy” and “a recession remains very much in doubt.”
Dudley went on to highlight the following positives:
- The economy retains considerable forward momentum: “Growth in the second quarter was revised up to a 3.0% annualized rate, and the Federal Reserve Bank of Atlanta’s GDPNow estimate for the third quarter is currently 2.5%”
- The labor market is holding together quite well: “Although the unemployment rate has risen above 4% from a low of 3.4% in 2023, the increase has mainly been driven by rapid growth in the labor force rather than permanent job layoffs”
- Financial conditions have improved: “Although monetary policy remains tight by almost anyone’s standard (interest rates are high), financial conditions have eased massively over the past year (stock prices have soared and bond yields have declined)”
Dudley concludes with the following: “What does this mean for financial asset prices? As I see it, a soft-landing scenario (lower growth but no recession) implies a buoyant stock market.”
I concur with Dudley: a strong US jobs market and declining interest rates are supporting economic expansion and higher stock prices.
Absent a nationwide catastrophe, or an about-face on key government policies, it’s reasonable to expect more of the same in the coming months: more economic growth, more US profit growth, and satisfactory returns from the financial markets.
For those concerned about the potential impact of the presidential election on the economy and financial markets, it may be helpful to consider the following chart that shows the direction of the stock market during US presidential administrations from Roosevelt to Biden, courtesy of Clearnomics.
Source: Clearnomics
The stock market, like the US economy, has experienced long-term growth under both major political parties, and has the propensity to “shake it off” when it comes to dealing with adverse conditions.
It is not the case that the market or economy turns down when a particular political party is in office This is because the underlying drivers of market performance – including economic cycles and company earnings – are far more important than who occupies the White House.
-RK