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Demand Begets Demand

Sigma Investment Counselors

November 11, 2020

This concept was the basis for the statement “a rising tide lifts all boats” which, according to Wikipedia, is the idea that an improving economy will benefit all participants, and that economic policy, particularly government economic policy, should focus on broad economic efforts.

The phrase is commonly attributed to John F. Kennedy, who used it in a 1963 speech.  In subsequent decades, the phrase has been used to defend tax cuts and other policies where initial beneficiaries are high income earners.

Regardless of the political implications, and circumstances of the initial beneficiaries, it is generally accepted that economic growth requires increasing demand.

With the completion of the November 2020 election, the country may enjoy a period of reduced jockeying for position and an increasing commitment to actually getting something done.  It should be clear to most of our leaders that Covid-19 has done a great deal of economic damage, on top of unacceptable levels of sickness and mortality.

Listening to the political rhetoric, it appears that the main areas of political difference are, how much and who to?

Investors should ask, how important is the answer to this question?  The economy is likely to respond favorably to boosts in spending without undue regard to the routing.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA

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