But as we’ve seen, Fed policy is no longer greasing the economy, as it did during the crisis, and it cannot solve these challenges. In other words, hiring won’t accelerate without the benefit of fiscal policy help in the form of training/education, research and development tax credits, or direct capital expenditure or hiring incentives.
Will those policies materialize? It’s difficult to say—because if you think monetary policy is unpredictable, fiscal policy is a whole other ball of wax. But pressure on companies to spend their excess cash will begin to increase, and investors should watch for activists to begin trying to extract this precious resource.
Rick Rieder, Managing Director, is BlackRock’s Chief Investment Officer of Fundamental Fixed Income, is Co-head of Americas Fixed Income, and is a regular contributor to The Blog. You can find more of his posts here.