It seems like I’m always trying to get back into shape. Life and time continue no matter whether I’m awake, asleep, working or running … they just keep moving forward. And while everything around me progresses, my body finds more and more excuses – and I discover more and more pains!
One thing that appears to continue moving forward in spite of all the negativity in the press is the economy and coupled with it, the stock market. Now in its seventh year, the economic expansion is indeed beginning to show some signs of aging.
Price/earnings ratios are above their long-term averages and industry pundits are claiming the end is near! We hear silly things, crafty phrases like “the strong dollar hurts US companies abroad” and “the collapsing oil price will kill jobs in America”. As with most soundbites, there’s something being said but out of context they serve only their intended purpose: to grab attention in overcrowded media environments.
The recession of 2008 was met with an unprecedented level of government intervention, and it is quite clear that there is little change in sight on that front. In my opinion, the government’s overreach has restrained growth substantially in the United States, and possibly worldwide. While I despise all of the increased bureaucracy and red tape being thrown against good common hard-working business people like myself, as with all issues, there is another side to the story.
Listening to the constant barrage talk about our “damaged economy” has served to restrain consumer spending to the point that now people must start replacing products that are becoming unserviceable. We have recently seen spectacular numbers in the automobile industry, and housing appears to be on the verge of a dramatic improvement as well.
Of course there are risks. My main concern for the long-term of our economy is the dramatically reduced labor participation rate. Baby boomers are retiring, and government entitlement programs are enabling otherwise able-bodied workers to stay out of the workforce. Additionally, our defunct immigration policy further exacerbates and impedes one of America’s most important traditional sources of labor.
But like this old runner, I believe that our economy will continue to slog forward with a 1% to 2% GDP growth rate. Slogging along with it, I expect the stock market to also continue its climb, but with increased volatility in the short run, for the foreseeable future.
SOURCES: JP Morgan Asset Management; Yahoo!Finance; The Wall Street Journal
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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