June 2017 Economic Update from Dan Stecich

Dan Stecich, Sr. V.P., Economic Research

Govt Spending Down, Private Sector Still Strong

I read the economic data on a regular basis. I continue to be disappointed with GDP growth. The number was only 0.7% in the first quarter of 2017. One big reason for the soft figure was a sharp slowdown in auto sales along with a drop in government expenditures. On the positive side consumer saving remains strong and while spending has softened a bit, it remains healthy. The consumer accounts for over two-thirds of GDP, so this is encouraging for the coming months. Employment continues to improve and this should also add to strength in the coming months.

Along with the previously mentioned positives, is the continued strength of the Institute of Supply Management reports. A reading above 50 indicates growth. Both the manufacturing and non-manufacturing (approximately 2/3’s of our GDP) components remain in the mid to upper 50”s, so this points to a reasonably solid economy.

Slow Growth is Still Growth

While the disconnect between the government figures other indicators is hard to explain, we feel the economic data means more. Additionally, we have seen a good earnings season, with over 70% of companies beating expectations and offering positive forward guidance. Finally, the outlook for the global economy is once again positive. So for now, it appears that many of the global economic issues that had lingered for so long re now in the rear view mirror.

The political environment remains a concern, with all parties remaining juvenile in conceding in even the most modest way towards cooperation. While the President had some momentum in the early months of his presidency, this has all but vanished with the many missteps that have occurred. It is fair to say that we believe the gridlock in Washington is the biggest impediment to growth on the horizon.  A big worry would be that the consumer will be affected to the point that their current optimism fades and the hope for growth would begin to vanish.

Careful but Optimistic

On whole, we remain optimistic but cautious. Stocks are still near record highs, but they are not as stretched as in past quarters. So the question remains, where do we go from here? Frankly, nobody can predict the near future. The most important thing is meeting with your advisor. Make sure your investment strategy fits your specific financial goals. Everything may be in good order, but without a regular review, you just can’t be sure.

Remember, you will likely be investing a lot longer than the next few years. Focus on controllable actions when planning your financial future. Investing is a long-term proposition and that requires patience and a periodic review increases your odds of success. Remember, headlines are often misleading, so take the time to read the whole story and let your mind rest easier.

For more information, contact us HERE.