Climbing the “soft landing” wall of worry.
We will soon surpass the previously held record for the longest period of economic expansion (previously 120 months from March 1991 to March 2001 – see opposite side chart). Investors are becoming increasingly tense about the ability of the economy to continue to grow at the steady, albeit relatively anemic pace. While economists continue to give conflicting predictions on both the direction and the health of the general economy, the trend lately has been decidedly less positive. The Federal Reserve confirmed some investors concerns by stating future interest rate increases are on hold.
Despite the fact that economists see more downside risks than upside going forward, many believe that the fundamentals for growth in the US remain good – particularly when compared to other countries. There also stands tobegreat potential benefit from a U.S. – China trade deal – whether actual economic benefits or just psychological as tariffs and contentious trade discussions tend to have more negative effects than positive. Importantly, investors must pay attention to how the economy handles a transition to slower overall economic growth than we’ve experienced previously and the effect that the transition has on consumer confidence and investor opinion.
In a recent poll of economists, only 20% felt a recession was likely in 2019 while that number grew to 35% for 2020. With mortgage rates falling in recent weeks housing markets are showing renewed signs of strength while inflation remains under control and upward pressure on wages is likely being caused by the very low 3.7% unemployment rate.
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