From all the recent headlines you’d think we would have tripped into the abyss.
By any reasonable measure, check out any Federal Reserve Bank, or The U.S. Bureau of Economic Analysis, Institute for Supply Management (ISM), The Conference Board – you get the gist; Recession is nowhere in view. Except, maybe, in the minds of those who may want a recession as an outcome.
So, what’s the State of the Economic Union? We are growing but at a slower pace. The consumer is spending at a record pace; wages and worker productivity are increasing, inflation, as measured by Personal Consumption Spending, is at 1.5%. Sounds too good to be true.
The Open Market Committee (OMC) of the Federal Reserve Bank has cut rates by .25 in anticipation of an economic slowdown – our economy is growing at about, at 2.1% (2nd quarter ’19) approximately the same GDP growth rate 2.0% as in 2016. It looks like we might have peaked around 3.5% in 2018. I believe the OMC is taking into account the economic slowdowns in China, Europe and elsewhere anticipating some contagion on U.S. growth.
Over the top – One of our mutual fund representatives and a good friend has his own economic indicators. We both agreed they were fun to chat-up and may actually be a sign that the good times may be too good. His friends:
- Have become investment geniuses.
- Are actively investing in commercial real estate.
- Their wives have become residential realtors, and most significantly…
- There is a ten-year waiting list with a $110,000 all-cash initiation fee at his country club. As opposed to a six-month wait and $45,000 initiation fee spread over five years in 2012.
Recession? Possible, yes. Likely, no. A slowdown, absolutely.
Our portfolios are exhibiting slightly higher levels of cash than in the recent past.
Carlos Dominguez – CERTIFIED FINANCIAL PLANNER™, Portfolio Manager, RJFS
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