What is the State of the Economy and the markets
Can there really be “too much of a good thing”? Can something be “too good to be true”? We all seem to be trained that “When life looks like easy street, there’s danger at your door”.
This is especially true when it comes to our money. One thing we do know is that recessions lead to markets. Therefore, keeping a ”keen eye on the prize” is certainly justified, all idioms aside.
The economy is certainly humming on all cylinders and bringing with it higher stock prices. It seems that every economic report is better than the last. The problem during these types of periods is that you won’t know what economic indicator will signify a proverbial top UNTIL for several months after it has occurred.
A report came out this week from Goldman Sachs stating there is “Little sign of a recession for the next 3 years”. Naturally this piqued my interest.
The report cited only the probability of a U.S. recession as “muted” in the near term, and only at 36 percent over the next three years, below the historical average. “Our model paints a more benign picture in which robust growth—coupled with receding concerns that financial conditions were unsustainably easy—have so far put a lid on US recession risk,” Goldman economists wrote.
Obviously this is music to my ears. This forecast corresponds to my feelings that the economy looks very good for as far as the eye can see. The indicators I follow mostly continue to look extremely strong.
- Corporate earnings keep surprising on the upside, In the recent quarter, 80% of S&P 500 firms topped analyst forecasts. In addition, 3rd quarter earnings are estimated to increase 21.6% and Q4 at 20.3%. That along with inflation remaining well under control and with the banks’ lending money at a feverish rate is a very good sign.
Here 2 other indicators I like to follow but don’t regularly report on:
- Weekly jobless claims-These are a measure of people who are filing for unemployment insurance for the first time. This number keeps dropping which means business activity is growing. Typically, the economy peaks 14.8 months after initial claims hit the cycle’s low.
- The ISM Manufacturing Index: The ISM recently rose 3.2 points in August to 61.3, the highest reading of the current expansion. A reading of 50 and above tells us that manufacturing is expanding.
What all this tells us is that, regardless on how we “feel” because things have been so good, there is no imminent danger on the horizon.
That does not mean there are no threats to the economy, financial markets and your financial success. The risks are definitely increasing and volatility will continue to increase with corrections more commonplace.
Before investing, be sure to put in the time to do the proper planning so you are taking advantage forward-looking investment tax-strategies, investing tactically to ensure you are getting the best return with the least risk possible, and you have an asset protection plan firmly in place, not if but when the market decides to crash again.
It all starts with a comprehensive Retirement Income and Tax-Strategy analysis, something we happily do for free for our clients.
If you would like your free customized analysis, simply give us a call today.
“Invest for need, not for greed™”
Cheers -Keith Springer