I recently attended an investing conference where an economist gave a speech entitled, “It doesn’t get any better than this.” He pointed out all the great economic news that seems to be the standard for the past couple of years.
One of the items was the very low unemployment rate. According to economists, our country is currently operating at full employment, meaning there are few employees left to hire. Of course there are always unique situations based on geography and training etc., but for the most part, we are currently in a worker shortage. Anyone who owns a company with job openings knows that the labor market is very tight.
The speaker went on to list the other areas where economically, we seem to be at the top of our game. He compared the economy to a sports car racing down the road at full speed with the pedal to the floor. It soon became very clear what he was getting at. “If it doesn’t get any better, then what might happen?” How can companies keep growing if they can’t add staff? How can people who are already spending at record levels, spend more? How can families who are starting again to max out their credit lines, borrow more? How can businesses that are already operating at peak efficiency, become more efficient? How is it possible for our race car with the pedal already on the floor, to go any faster?
And so we potentially have another financial storm on the horizon but a very odd storm indeed. This is not a storm of disaster. This is a financial storm created by success. In short, the economy is so strong, corporate profits are so good, and unemployment is so low, that it is becoming more difficult to see where the next phase of growth will come from.
Investors don’t care as much for what is going on right now as they do about how things will be six months to a year from now. They want and need to see a potential for growth.
I feel confident that we are not at the end of the economic upcycle. But for reasons mentioned above, I think there is some risk that our meteoric rise might slow down. Potential things on the horizon that could continue to create growth would be the effects of the tax cuts, which really start to kick in next year. Increased efficiency could allow businesses to grow without having to add significantly to their workforce. Favorable trade deals that benefit American companies would help. And continued reduction in regulations that impact businesses. All of these have the potential to add more fuel to the economy.
I believe we can keep this growth going. I believe we still have some good times in front of us, but we must be increasingly aware that the pathway may start getting a little more difficult.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 375 E Riverside Dr, St. George, UT 84790
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