Seventh-Inning Stretch or the Start of a Five-Day Cricket Match?
Baseball and Apple Pie...and Guessing the Federal Reserves Next Move?
Right on cue, it seems that in every economic cycle an analogy is made to what inning we are in based on the trajectory of growth. The great hope of economists, against all historical evidence to the contrary, is that they will be able to predict the next financial downturn. Currently, many prognosticators believe our present cycle is in its last few innings, as the current economic expansion is now in its ninth year. Yet almost all of these same economists were silent prior to the Great Recession that started in 2007--if they were even in the business then.
Cricket Test Match
Australians love cricket. The English, the Irish, and even the Dutch are cricket fans. And while it was a popular sport in the United States during the 1800s, there are very few in the US today who know much about the game. A Test Match in cricket can span three, four, or five days, far surpassing the longest MLB game ever played, which lasted slightly over eight hours. When it comes to economic analogies, perhaps a Test Match in cricket would be more appropriate than our American pastime?
It is clear that the US recovery since 2008 is among the most consistent and sustained, compared with its predecessors. However, it could also be considered lackluster when the extra efforts of the government and the central bank are considered. Wage, core, and even health-care inflation have been muted over the last 18 months.
We believe the real question that the Federal Reserve, and all the Fed watchers, should focus on is: how can the US sustain its current, long, slow trajectory and avoid the volatile sharp swings in GDP growth that have been evident in the past? Perhaps, to cultivate patience in our economic outlook, we should all don our baggy green cap, the Australian Cricket coat of arms, and head to the pitch to watch a five-day Test Match.
