Economic Update from Dan Stecich of Athena Private Wealth

Daniel K. Stecich, MBA
Sr. Vice President, Economic Research

Encouraging GDP Growth

After many disappointing quarters of economic growth, we seem to be experiencing the long-awaited recovery from the recession of 2009. Growth in the third quarter of 2016 came in at 3.2%, the strongest reading we have seen for two years. While it’s still too early to tell if this will last, there are many signs that it will. Aside from the GDP figure, income and spending are up, and these components make up 2/3rds of GDP. Consumer confidence is up, along with hourly earnings. This earnings season has finally shown a healthy rise following a large cumulative decline for the past six quarters. Does this add up to a definitive case for growth? Not quite, but the signs are certainly on the plus side.

Carefully Optimistic

As nice as the rally has been, it’s important to be careful. We have experienced similar growth in past quarters only to be disappointed with its staying power.  Many attribute the rally to an expectation of  a pro-growth political environment. But the economy will still be the biggest driver so it will be crucial to pay attention to data as well.  

One recent piece of economic data that moves with the economy is the ISM (Institute for Supply Management) survey, and they said its nonmanufacturing index rose to 57.2% last month from 54.8%. Any reading over 50% signals that more businesses are expanding instead of contracting. This has been solid for some time now and because it is not a government release, it tends to have a little bias in it. Firms across the nation are surveyed for their thoughts on the economy, and their collective thoughts are released monthly. It’s also important to note that the consumer accounts for over 2/3rds of our GDP, so this is a good indicator of the current state for the economy.

Finding Value

So now the question becomes, where does one find value in an elevated market? It won’t be easy, as almost all sectors have gone along for the ride.  Keep in mind that a correction is quite likely, but barring any that there will be any major problems that would cause any long lasting harm. But it’s always important to have a plan for such risks. The best approach is to sit down with your advisory team to review your investments relative to your risk budget. If you have done this recently, you may not need changes.  If it has been awhile, just look carefully and adjust if your life or risk budget has changed.

Don't Guess - Invest

We stress this often, but it’s important to remember that we are investors, not traders. It would be great to be able to buy low and sell high all the time, but even the very best traders have limited luck with that. Your decisions should focus on solid economic fundamentals, where a long-term view will pay handsome dividends. A diversified portfolio is always your best protection against erratic market moves and will provide you with peace of mind in the uncertain times we often face. As always we wish you the best and welcome any and all questions you may have.