Despite A Chorus Of Bears, The Bulls Played On
Despite some frightful headlines, the bottom line on the entire array of forward-looking economic data is that continued economic growth is ahead.
For example, the best forward-looking index of economic activity, the U.S. Index of Leading Economic Indicators, is tracked monthly by The Conference Board, a private business group. The LEI reliably collapsed in the months before recessions in the past, and its latest release showed a rise of three-tenths of 1% in July. That followed gains in June, May, April, and March.
"The U.S. LEI improved in July, suggesting the U.S. economy may experience further improvements in economic activity in the second half of the year," said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. "The large negative contribution from housing permits, a reversal from June, was more than offset by gains in the financial indicators, new orders and sentiment."
Meanwhile, the world economy is expected to grow by 3.5% in 2017 and 3.6% in 2018, according to the latest quarterly outlook from the International Monetary Fund.
The IMF lowered its U.S. growth projections from April, primarily reflecting the assumption that fiscal policy will be less expansionary than previously anticipated. But growth expectations were revised up for Japan and Europe, where positive surprises in late 2016 and early 2017 point to "solid momentum," said the IMF. "China's growth projections have also been revised up, reflecting a strong first quarter of 2017 and expectations of continued fiscal support. Inflation in advanced economies remains subdued and generally below targets; it has also been declining in several emerging economies, such as Brazil, India, and Russia," according to the IMF.
An expanding world economy is good for the United States.
Unemployment has not been so low since 2001, the balance sheet of Americans is strong, personal income after inflation has been accelerating, and the consensus of economists surveyed by The Wall Street Journal in July was for an average growth rate over the next five quarters of 2.5%.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market value weighted index with each stock's weight in the index proportionate to its market value. You cannot invest directly into an index
The new leg of the eight-year bull market that began after the election of President Trump continued last week, and the Standard & Poor's 500 stock index - a barometer of American promise - closed the week up about 0.7% at 2443.05, only about 2% off from its all-time high.
Political uncertainty, a natural disaster, the nuclear standoff with North Korea, or a totally unexpected event could trigger a 10% or 15% drop in stock prices at any time.
However, the economy is not showing signs of weakness and a recession and bear market are not on the horizon.
The leading indicators and entire array of economic benchmarks are good and - despite the bearish predictions in the press - stock prices could be driven higher and the 96-month expansion could continue.
This article was written by a professional financial journalist for PGWM, LLC., and is not intended as legal or investment advice. © 2017 All Rights Reserved.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market value weighted index with each stock's weight in the index proportionate to its market value. You cannot invest directly into an index.
This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Past performance does not guarantee future results.