Scott B. Taylor

05/27/2026

Not So Bad

You don’t have to go very far to find lots of negative commentary in the popular press about the current state of the US economy. High gas prices (due to a “war of choice”) are squeezing consumers’ budgets, and so the economy is headed for a ditch. Many economists look back at history and blame lots of recessions on oil prices alone.

In terms of the official inflation reports, the popular narrative has a point. Over time, inflation is a monetary phenomenon, but in the very short term an oil price spike can change measured inflation because consumers (and businesses) dip into savings temporarily to spend more and the basket of goods and services used to measure inflation doesn’t immediately change.

As a result, the Consumer Price Index is up 3.8% from a year ago, which is well above the Federal Reserve’s 2.0% target. This will likely keep the Fed from cutting short-term interest rates for at least the next few months. However, an oil price shock is typically a temporary issue. And the impact on the economy has been muted. After adjusting for inflation – things appear not much different than before the war with Iran started.

While events in the Middle East are dramatic, we look at broader macro trends. To us, it’s surprising the economy has not paid more of a price for the reversal of massive COVID stimulus. Deficits have been relatively stable and the money supply has slowed dramatically. If the economy slowed, it would be because of this, not an oil price supply shock.

We also think US stocks are overvalued, although saying that repeatedly doesn’t mean they will fall, no matter what our official forecast is. We are math and model driven, we are not traders and we have no way to judge pure momentum trades.

We also don’t think we’re on the verge of a 1980s-90s style economic boom, in spite of advances in Artificial Intelligence and technological innovation more generally.

The size of government is substantially larger than it has been anytime during the age of the Internet. For the past 20-25 years average real growth in the US has been just about 2% per year. This is less than half the growth the US experienced in the

20 years post-WWII, and it is happening in spite of incredible new technologies that should raise productivity. More resources being allocated by politicians rather than market forces always slows growth.

So, while we see what some might call malaise because government is such a drain on the economy, the evidence of the economy being on the verge of a recession simply isn’t there, at least not yet. We appear to still be in the Plow Horse economy phase, where our thoroughbred technological race horse must carry an overweight bloated jockey.

Real GDP grew at a 2.0% annual rate in the first quarter, and we think is growing at about a 3.0% annual rate so far in the second quarter. The Atlanta Federal Reserve Bank’s GDP Now Model is even more optimistic for Q2, now projecting growth at a 4.3% rate.

In the meantime, initial claims for jobless benefits have averaged a very low 203,000 the last four weeks, lower than they were a year ago, six months ago, and three months ago. Yes, job growth has slowed, but we think this is largely related to the shift to roughly net zero immigration over the past year or so.

Manufacturing production is up 1.2% from a year ago, which is not great, but not a sign of recession, either. For comparison, manufacturing was down at a 0.4% annual rate in the ten years that ended in April 2025.

We get a report on April durable goods orders on Thursday and expect a big number, led by more aircraft orders. Yes, aircraft orders are volatile from month to month, but airlines ordering more planes suggest they see through the fog of the recent conflict and all is not gloomy ahead.

Yes, much of recent economic growth is being led by AI and data centers, so a case can be made that economic growth is not very broad. But at least the limited boom in AI and data centers is coming primarily from market forces, not government-directed malinvestment like housing in the early 2000s, or government-sponsored “green energy” of recent years.

All is not well with the US economy, but the narrative of doom and gloom is being oversold as well.

Brian S. Wesbury – Chief Economist
Robert Stein, CFA – Deputy Chief Economist

05/22/2026

Sponsoring the MMTA’s Annual Person of the Year directly supports a family’s path into the trucking industry, one that might otherwise be out of reach due to the cost of training. Contributions benefit the Walt and Harriet Thompson Scholarship Fund. I’m proud to stand alongside this outstanding organization and the members it represents.

05/11/2026

The Bull Case is Largely Based on Hope

The stock market is on an absolute tear, with the Nasdaq up 5% last week and nearly 13% year-to-date. The proximate causes include a cease-fire somewhat holding with Iran, a 28% surge in S&P 500 corporate profits in the first quarter, and some consensus-beating economic reports, like Friday’s payroll numbers.

We have been cautious on this market…and overly pessimistic up to this point. So, should we rethink that? Should we become more optimistic about stocks?

The optimistic case was summed up in an X post by James E. Thorne at Wellington Altus who said there is a “systematic underestimation of an AI-driven productivity revolution…a Cap Ex Super Cycle, [an administration that is] letting the economy run hot, and multiple expansion [due to] a Peace Dividend. History suggests that when productivity waves coincide with supply-side policy and geopolitical de-escalation, as in the 1990s, both earnings and multiples expand beyond historical norms.”

Let’s go through this list one item at a time. 1) Is AI really driving a productivity boom? According to McKinsey, 88% of companies say they use AI in at least one business function, but just 7% say they have expanded its use enterprise wide. As far as we know, there are little data showing a direct correlation between AI and profitability. While many could surmise this, it remains a forecast. And, while, capex is growing, it is concentrated in (or related to) data centers. Excluding that, investment is weak. A Super Cycle is an exaggeration.

Events in the Middle East are certainly promising. Having the UAE exit OPEC is a big deal. It suggests a more “go it your own way” free market world, not one divided into factions. However, Iran seems a long way from being willing to accept this reality and we are not convinced a “peace dividend” is really in the cards. We hope and pray that it is, but we haven’t seen a Peace Dividend or full-blown geopolitical de-escalation yet, just hope.

Finally, are we really in a Supply Side revolution? Well, Reagan cut the top income tax rate from 70% to 28%. Other than tax cuts for tips, social security, and overtime, the top tax rate is the same today as it was last year, and will be next year. Overall government spending has been flat, which means it is declining as a share of GDP, but Congress has yet to pass a budget that promises continued spending restraint in the future.

Regulation has been reduced, but could be expanded again if a more pro-regulation president gets elected in 2028. Virginia is a perfect example…the new governor is trying to reverse the direction of policy put in place under the previous governor. Recent spending and regulatory restraint don’t pre-commit future presidents and congresses to the same policies.

So, while many positive developments are taking place, the idea that we are entering into a long-term secular bull market seems a stretch. The PE ratio on trailing earnings of the S&P 500 is currently near 29. When Reagan entered office and cut both tax rates and spending, and broke the back of inflation, the PE ratio was 8. Even if policies today were equally as good, the same kind of boom should not be expected.

We aren’t pessimistic even though it might sound that way. The US (as it has done for 250 years) is pushing back against feudalism in all its forms. At the same time, AI is a transformative technology. But it will take time for these things to fully play out, and we think markets are underestimating the time, energy, and volatility it will take.

Brian S. Wesbury – Chief Economist

Robert Stein, CFA – Deputy Chief Economist

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04/14/2026

Rate Cuts on Backburner

If you expect Kevin Warsh to quickly take the helm at the Fed and start cutting rates, you need to adjust your expectations.

For one thing, the timing for Warsh getting confirmed as the new Chairman at the Federal Reserve is murky, at best. The Senate hearing for Warsh has been delayed and yet to be rescheduled. One issue is that retiring North Carolina Republican Senator Tom Tillis has said he will refuse to vote for Warsh unless and until the Trump Administration makes it clear it will not try to prosecute current Chairman Jerome Powell, for alleged cost overruns on Fed-related construction projects or otherwise.

Another reason why rate cuts are on the backburner is that even if Warsh gets confirmed in time for the June meeting he may not have the votes for rate cuts from other board members and Fed bank presidents. The consumer price index jumped 0.9% in March on the back of soaring gas prices due to the Iran War. These prices are now up 3.3% from a year ago, well above the Fed’s 2.0% target.

Yes, core consumer prices, which exclude food and energy, were up only 0.2% in March – but they are still up 2.6% from a year ago. Even Powell’s COVID-era invention of “SuperCore” inflation, which excludes not only food and energy but also other goods and rent, so that it focuses narrowly on services is up 3.1% on a year-ago comparison basis. In other words, no matter how it’s viewed, inflation remains uncomfortably high.

Hopefully the Iran War will end soon and on favorable terms, which could quickly send oil prices back down to February levels. And if it does then that may give enough Fed officials the confidence for some modest rate cuts.

But the end of the Iran War and its economic implications don’t seem imminent. As we write this it appears that President Trump is willing to double-down on a closure of the Strait of Hormuz, which in the near-term means higher oil prices, less revenue flow for the Iranian government, and less access to oil globally. It’s tough to read Trump’s mind, but we are guessing that he thinks a closure would get more NATO members, many of whom are dependent on Middle East oil, more involved and supportive of the US effort.

There are also reports that both Israel and Saudi Arabia (and perhaps others) are fully committed to regime change in Tehran, seeing this as the best opportunity to bring that about and if it doesn’t happen soon – via either a popular revolt or a coup – it might not happen for many years.

In the past, military conflict has not necessarily been bad for stocks. Think 2003, when stocks did very well the same year that Gulf War II began under President George W. Bush. But back then stocks were undervalued after getting crushed the prior three years, with the S&P 500 down more than 40% from the high in March 2000.

By contrast, we believe stocks are still overvalued in spite of robust profit growth in the fourth quarter. Unless profits soar from current levels or, in the alternative, we get much lower long-term interest rates without a recession, it’s going to be hard for US equities to generate the robust returns of the last couple of years. We continue to urge investors to be cautious.

Brian S. Wesbury – Chief Economist

Robert Stein, CFA – Deputy Chief Economist

03/23/2026

It’s a Topsy Turvy World

We wrote the above MMO title “Topsy Turvy World” two days ago. On cue: the stock market has a massive reversal to the upside. At one point last night, Dow futures were trading below 45,500, this morning they traded over 47,100 – a 1,600 point swing.

Why? President Trump backed off from threatening to bomb energy assets in Iran and mentioned “cease fire” talks in a post online. Up and down oil prices, volatile stock prices, and bond yields, violent moves in gold prices…that’s all part of the fog of war.

But that’s not the only issue investors and policy makers have to deal with. At his press conference last week Fed Chairman Jerome Powell made a surprisingly transparent comment, admitting that many members of the Fed have “no conviction” on how the economy will evolve.

After telling us all that inflation would be “transitory” a couple of years ago, we think Jerome Powell should use this phrase more often. The Federal Reserve was way too loose during COVID and was so because it chose politics over the target of 2.0% inflation.

Powell now claims he’s all for “Fed independence,” but the Fed accommodated huge deficits and COVID lockdowns and only has itself to blame for making politicians angry. Especially now that there are rumors that some Fed members want to “raise” rates into a war and higher oil prices. That makes zero sense and many see it as continuation of Powell’s fights with the President.

But Powell is right, there is a high degree of uncertainty about the economy right now. Let’s start with the Iran War.

The Trump Administration seems less likely to press on for a widespread popular uprising and more likely looking for some sort of military coup by leaders who will throw off the mullahs and commit to the country becoming more friendly with the West. Think President El-Sisi in Egypt, but with oil money. However, with much of the leadership killed or leaving, who the Administration negotiates with is a mystery.

Meanwhile, the hard numbers on the economy are tepid. Real GDP growth for the fourth quarter of last year, which the Atlanta Fed GDP Now model pegged as high as 5.4% back in January, has been revised down to just 0.7%. For the labor market, private payrolls are up 33,000 per month in the past year, but without health care & social assistance private payrolls are down. Manufacturing and retail jobs are both down.

When it comes to inflation, recent figures have been downright bizarre. Producer prices rose 0.7% in February and are up 3.4% from a year ago. But the increase has been led by the services sector, not the goods sector. This is the opposite of what the Fed and many analysts feared a year ago. Prices for goods in the PPI are up 2.5% in the past year, while services prices are up 3.8%. We see a similar pattern for consumer prices where services prices are up 3.1% in the past year while commodity prices are up 1.3%. The effect of tariffs has been much more muted than many feared.

Yes, inflation is still above the Fed’s 2.0% target. However, monetary policy has been relatively tight the past few years after the massive surge in the money supply in 2020-21. In the ten years prior to COVID, the M2 measure of money grew about 6.0% per year with inflation averaging at or below 2.0%. In the past year, M2 is up just 4.3%. The Fed is not too loose right now, which is why chatter about the next rate move being a hike doesn’t make sense.

In the meantime, the stock market has been hit, but not excessively so. Some investors are worried it’s no longer increasing, but at the market close on Friday, the S&P 500 was down a modest 6.8% from the pre-Iran peak back in late January. If these investors are freaking out right now, wait until they get a full correction or even a bear market. In our view, the S&P 500 has been overvalued for quite some time, so although fingers are pointing right now to the conflict in the Middle East, we believe there was substantial downside risk to equities even in the absence of the war.

Yes, the technological progress being made with Artificial Intelligence is impressive. But we think there has also been some AI hype that is overdone in the short-run even though it will be transformative in the long-run.

The Fed’s decision made sense: don’t change the target for short-term interest rates if we don’t know what the world will look like tomorrow. But investors need to remember a couple of important things. Rate cuts, if they ever come, are less important than the money supply. A cease fire in Iran will be positive in the short-run, but we still live in a volatile political world with the Trump Administration fighting the enemies of freedom on multiple fronts. And, finally, stocks are expensive. Don’t ever get complacent, it’s a Topsy Turvy World.



Brian S. Wesbury – Chief Economist

Robert Stein, CFA – Deputy Chief Economist

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11/12/2025

Most groceries no longer have the services we grew up with. Today, we are responsible for selecting healthy food, comparing prices, scanning our food at the register and bagging.
This is what has been going on with 401(k)'s over the years as well. Service has evaporated, leaving the client responsible for the plan's investment selection, fee auditing, processing and managing participant transactions.

The MMTA Members Retirement Plan is a return to full service without full-service cost. Here is a list of everything this member benefit does.
It's time to ask yourself, why are you, the client, doing all these things. This benefit is a return to what a 401(k) should be, a return to treating the client as the client.

FIDUCIARY ROLES
MMTA PEP

3(21) Plan Fiduciary ✓
3(16) Plan Administrator ✓
3(38) Investment Manager ✓
Trustee ✓
Prepare and Sign Form 5500 ✓
Review and Approve Distributions ✓
Review and Approve Hardships ✓
Review and Approve Loans ✓
Review and Approve Rollovers into Plan ✓
Qualify Domestic Relations Orders ✓
Determine Beneficiaries and Payment Claims ✓
Determine Eligibility and Notify Participants ✓
Prepare and Distribute Required Plan Notices ✓
Perform Required Plan Discrimination Testing ✓

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05/29/2025

WHERE DO PEOPLE HAVE THE BEST QUALITY OF LIFE? Countries often measure success by comparing how much their economies produce. The United Nation’s Human Development Index (HDI) considers success from a different perspective by measuring quality of life. The index focuses on three fundamental aspects of human development: length of life, access to knowledge, and income.

The 2025 HDI, which reflects data from 2023, showed that many wealthy nations (97 percent) have regained or improved on their pre-pandemic HDI scores, while just 60 percent of poorer nations have recovered, reported The Economist.15 The countries with the best quality of life were:

1. Iceland,
2. Norway and Switzerland (tied),
4. Denmark,
5. Germany and Sweden (tied).

The countries with the lowest quality of life were:

188. Niger and Mali (tied),
190. Chad,
191. Central African Republic,
192. Somalia, and
193. South Sudan.

The United States ranked 17th in the Index, tied with Liechtenstein and New Zealand. In 2023, U.S. life expectancy at birth was 79.3 years, and Americans could expect to complete about 15.9 years of school. U.S. gross national income – the total amount of money earned by people and businesses in the U.S. – per capita was $73,650.17 The ranking “puts the country in the Very High human development category,” stated the UN report.

Think About It
“The true test of character is not how much we know how to do, but how we behave when we don’t know what to do.”
– John Holt, Educator

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01/15/2025

2025 will be a culmination of new services my firm put in motion last year: Comprehensive Financial Planning through a strategic partnership and a proprietary Pooled 401(k) Plan for the Maryland Motor Truck Association membership. Let's challenge the status quo and grow!

11/26/2024

THANKSGIVING ABUNDANCE. Turkey, mashed potatoes, and cranberry sauce have been on the Thanksgiving table for a long time. In many homes, though, the holiday meal has evolved to include regional dishes, cultural treats, and family favorites. People who responded to a social media post asking about unique Thanksgiving dishes reported that their meals include:

· Sliced tomatoes, cucumbers, olives, and onions with oil and vinegar,
· Chorizo cornbread with jalapeños,
· Sashimi and grilled salmon collar,
· Cranberries, grapes, walnuts and whipped cream salad,
· Quinoa with roasted delicata squash, kale, and pistachios,
· Creamed pearl onions,
· Spinach casserole,
· Twice baked potatoes,
· Shrimp and mirlitons (pear-shaped squash), and many other dishes.

Another reason Thanksgiving meals have evolved is dietary preferences. Some families include one or more vegetarian or vegan members, and others are eating less meat for health reasons

Of course, grocery stores have played a significant role in the evolution of Thanksgiving dinner. “The average grocery store today has 300,000+ [items in stock], nearly eight times more than the average store of the 1970s,” reported Andy Nelson in Supermarket Perimeter.10 Having access to a wider variety of ingredients makes it possible to prepare holiday feasts that make your taste buds happy.

What is your family’s favorite Thanksgiving dish?

Weekly Focus – Think About It

“The first Thanksgiving meal in Plymouth probably had little in common with today’s traditional holiday spread. Although turkeys were indigenous, there’s no record of a big roasted bird at the feast. The Wampanoag brought deer and there would have been lots of local seafood (mussels, lobster, bass) plus the fruits of the pilgrim harvest, including pumpkin. No mashed potatoes, though. Potatoes had only recently been shipped back to Europe from South America.”

—Origins of Thanksgiving National Holiday, History.com

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11/07/2024

Our parent's generation, when planning for retirement, were concerned with leaving money behind for their children. The current generation is more concerned with maintaining their lifestyle. What changed?

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