The Weekly Update 9/8/2023
The Wall of Money!
Very quietly the U.S. Government has passed several economic stimulus acts. Specifically, The Inflation Reduction Act (IRA), The Chips and Science Act (CSA) and the Infrastructure Investment and Jobs Act (IIJA).
So far there have been over 35,000 new projects announced that represent almost $1 trillion in new plant and capital investments. Of the nearly $1 trillion announced, only about $200 billion has been invested.
In the chart below, notice how much bigger this spending is compared to the last 20 years.
Figure 1: Total US Manufacturing Construction Spending
($ in billions; seasonally adjusted annualized rate)
These programs have incentivized corporate America to improve supply chains and manufacturing here in the U.S. This will create jobs that should allow more people to earn income, pay taxes, spend on stuff and to save for years to come.
This Chart only represents about 20% of the total announced, so it is reasonable to assume more spending waves are on the way! Perhaps equally, or more important, is the corresponding effect that results from this spending. Long time readers will remember that in our Sign #1 of the Seven Signs of a Changing Economy™ Personal Consumption Expenditure (PCE), I refer to new residential construction regularly. Why? Because anything “new” requires many inputs versus the sale of an “existing” asset!
Per a Blackstone 2020 study of new residential construction, every $1.00 in construction spending had a 3x multiplier in related spending, i.e., a $1 million dollar new home construction adds $3 million to our economy.
This graph also suggests to me that the next twenty plus years will see economic expansion much like we experienced starting in the early 1980’s.
At The Wealth Strategies Group, we intend to invest the investment capital entrusted to our oversight by our WSG family to be in front of this tsunami of spending.
I’m interested in your thoughts, comments, and observations. Feel welcome to call, email, or stop by the office and say Hi.
James O. Lunney, CFP®
CERTIFIED FINANCIAL PLANNER™ Professional
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.