Summer Economic Update

Daniel K. Stecich, MBA

Growing Economy

After many quarters of sluggish growth, our economy showed strong 4.1% growth in the second quarter. While the headline was a very healthy report, the backstory is equally impressive. Consumer spending was very strong, accounting for over two-thirds of the growth and the balance coming from exports and government expenditures.  Employment has also continued its rebound with employment at a rate not seen for many years now. The number of jobs available exceeds the number of workers needed to fill them. Also encouraging is the continued strength of almost all other economic data, along with a rebound in Eurozone growth. Add to all of this stellar earnings reports and we appear to have a bright path ahead of us.

Still Some Risks

While this news encourages investors, one always needs to prepare for any possibilities. The most pressing issue is the talk of tariff wars. So far the tiff with the Eurozone appears to be mending, but China is still worrisome. However, recent reports suggest that talks may resume soon. Our belief is that most of this has been posturing. Hopefully, all parties will realize that compromise will be in the best interest of all concerned. There has been some minor harm to date, but once the bluster is gone and compromise is attained, the damage done should soon be unwound.
In other negative news are the situation with Turkey and the devaluation of their currencies and the effect it may have on world economies. We recently experienced a similar situation with Greece and while uncomfortable, it did ultimately prove to be a very short disruption to the marketplace. While Greece GDP is much smaller than that of Turkey, their percentage of worldwide GDP is still relatively small. This isn’t to say that nothing will happen, but just that currently this looks unlikely.

Focus on What is Controllable

Fortunately, there don’t appear to be other clouds in the geopolitical arena. But as we’ve seen many times, these can pop up from nowhere so we need to be prepared. The best way to do that is to sit down with your advisor and review your portfolio and investment objectives. Have a plan that you are willing to stick to. Focus on what is within your control, such as your savings rate, the risk of the portfolio, investment expenses, and especially tax planning.  We constantly preach this, but at a time when so much looks good, it’s easy to overlook inefficiencies and potential risks. While the markets may look great, it never hurts to discuss the “what ifs”.  As the old saying goes, “An ounce of prevention is worth a pound of cure”.

We wish you the best. As always, please contact us with any questions you have.