Essay Sample on US Economic Outlook: A Key Indicator for Investment Profitability

Introduction

The US economic outlook determines is determines the level of profitability in the USA markets. Therefore, we cannot ignore the economic indicators to assess the economic viability of our investment. Gross domestic product is one of the parameters that help the government and investors to ascertain the production output. Apple Company also relies on this data to evaluate the growth rate of the economy. The Federal Government has been consistent on implementing the fiscal policies that have yielded positive impacts to the US companies and economic growth. Over the past two years, the government has implemented several policies such of the Tax Cuts and TCJA's, and the United States Mexico Canada Trade Agreement which have a direct impact to the company's revenues and profits. The government TCJA's expects that the TCJA''s are likely to have a long-term effect on the economic growth business investment, wages and employment. After the federal government's implementation TCJA' the Apple Company has been experienced tremendous growth rate.

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The GDP levels have been declining every year. The government data projects that GPD could slow by 2.2% as a result of continued increases in consumer spending, rebound fixed investment and trade wars between the US government and other countries. The output is likely to be higher than the maximum output in the economy during this year when compared to other recent years (Stein, 2020). Moreover, the employment rate and wages are anticipated to be high. However, after 2020, economic growth and may decline to an average rate of 1.7%. The average growth rate will be, less than the long-term historical average. Also, the interest rate on 10-year treasury is likely to rise to about 3.1 per cent before 2030. The inflation rate shall average 1.9% in 2020 but rise to 2.0% in 2021. The unemployment rate shall average of 3.5% in 2020.

However, the government latest budget deficit is likely to crowd out important programs such as private investments that steer economic growth. The increased government spending may increase the interest rates which may be dangerous to the economic growth of businesses (Cox, 2020).

A strong fiscal outlook is essential from any growing and growing economy. A strong fiscal foundation is an indication that companies have access to capital, they have enough resources for future public and private investments, and there is reliable consumer and business confidence. However, with fiscal challenges, the economic environment becomes unpromising and lowers investment confidence among businesses. In this case, any businesses may likely deteriorate and lead to a greater economic crisis. Our company is among those companies that are facing similar dangers caused by the fiscal decline. We should expect various economic challenges as we anticipate to take the company a notch higher than the last financial years.

According to John (2020), a fiscal deficit is an illustration that the company will divert more of its resources to interest payment at the expense of investing in areas that will contribute to the economic growth of a country. Therefore, we expect a slow growth rate of the economy which translates that companies will have to look for strategies that will enhance sustainability, especially during the economic crisis. Moreover, when the government is in financial deficit, it is likely to compete with nations fund and as a result, the move may increase interest rates (MacGuineas, 2020). However, the Federal Open market Committee has maintained that the current federal fund rate shall continue ranging from 1.5% to 1.75% (Amadeo, 2020). We are all aware of that high-interest rates may translate to the high cost of capital which may slow our advancement to breakthroughs.

Moreover, companies may not afford to increase the salaries of employees. Employees from other institutions are our customers. The increased cost of living could reduce the per capita income if the companies cannot afford to increase their salaries. We depend on those employees as our customers, and if their disposable income is limited, they may not afford to but our products. Moreover, Overtime, investors are likely to reduce their confidence in investing in our company fearing the growth of productivity. Moreover, high-interest rates offered on loans would scare away new investors. The slow growth of per capita income could reduce disposal income among our investors.

However, nothing we can do to save the government from running into deficit. But we can use various strategies that can help us improve our performance and maximize profits. But we can use market penetration and market development approaches to gain a larger market share and sell more company products. The company should also look for new markets and boost its profitability. New markets shall increase the sale volume and as a result, increase the revenue. The company should stop relying on the North American markets and diversify its investments in new areas. If the fiscal policies create a negative impact on the US economy, then the Company could face serious financial woes. In such circumstances, access to a new market in the overseas could help to balance the revenue downfall.

References

Amadeo, K. (2020, February 27). What Will the Economy Do in 2020 and Beyond? Retrieved from https://www.thebalance.com/us-economic-outlook-3305669

Cox, J. (2020, February 12). US deficit surges 25% in fiscal 2020 and is $1.1 trillion over the past year. Retrieved from https://www.cnbc.com/2020/02/12/us-deficit-swells-25percent-in-fiscal-2020-up-1point1-trillion-over-past-year.html

John B. Taylor. (2020, January 23). Restoring Fiscal Order in the United States. Retrieved from https://www.project-syndicate.org/commentary/restoring-fiscal-order-in-united-states-by-john-taylor-5-2020-01

MacGuineas, (2020, January 1). A resolution for Congress in 2020: Make better fiscal policy decisions. Retrieved from https://thehill.com/opinion/finance/476458-a-resolution-for-congress-in-2020-make-better-fiscal-policy-decisions

Stein, J. (2020). U.S. deficit to eclipse $1 trillion in 2020, CBO says, as fiscal imbalance continues to widen. Retrieved from https://www.washingtonpost.com/business/2020/01/28/us-deficit-eclipse-1-trillion-2020-cbo-says-fiscal-imbalance-continues-widen/