Summer Economic Update

by Daniel K. Stecich, MBA

With all the volatility that the markets recently experienced, it’s a good time to go over what has happened and what may be ahead. Let’s start with the good news.

First quarter GDP was better than expected at +3.2%.  Consumer spending increasing slightly, but business spending coming in a bit softer. The economy showing some resilience, despite the trade ills. This was one of the stronger first quarters in recent memory, and the second quarter usually sees a pick-up…we’ll keep our fingers crossed. 

In addition to GDP, employment is at it’s best level in 50 years and showing no sign of abatement, with job openings still exceeding demand for them. Also, ISM readings still remain strong with the May non-mfg (60+ percent of the economy) report coming in at 56.9. An ISM number above the 50 indicates growth. Finally earnings remain positive, but are expected to be down slightly from the year earlier period.

With all of this seemingly good news, what’s to fear? Two things come to mind. First, the ongoing trade discussions are making investors nervous. Should a full blown trade war occur, the economy is sure to be affected, along with earnings and GDP growth. Will it happen? I believe it's unlikely, but worth watching with caution. Secondly (and this isn’t as big) is the ongoing congressional hearing regarding the Robert Mueller report on President Trump. This makes for great headlines, but even if the possibility of impeachment does happen, it will go nowhere in the Senate. The problem is the contentious nature of the hearings and the  gridlock it brings to the government. Neither of these issues look to be resolved anytime soon, so it’s important to be prepared.

This bring us to what to do in the coming months. The first thing that needs to happen is to have a plan of action. While the markets still appear healthy, there is always the risk that aforementioned obstacles to growth could in fact occur. If they do, there would likely be a correction in equities. Make sure your investments match your budget for risk. Give your advisor a call to make sure. The markets have had a remarkable run since 2009, but it’s unlikely that this will continue forever. Make sure you’re prepared. Should there be a correction, it may offer an opportunity to add to some positions, especially if you are in the accumulation phase of your investment cycle.

This is not meant to be a warning, but rather an update of what possibilities may occur. We are long-term investors and want to make sure that your portfolio helps you meet your individual needs. If you feel it is needed, contact us to make sure your strategy is on track to accomplish that.