The State of the Economy Thread - “Falling inflation, rising growth give U.S. the world’s best recovery”

[China]

This is the factor that’s likely to determine whether there’s a U.S. recession

 

The U.S. economy is in a confusing place. The fundamentals look strong: Jobs are plentiful, inflation is tame, wages are rising and the economy continues to grow a tad above 2 percent, which most experts think is the Goldilocks pace.

 

Yet a lot of credible voices are warning that a recession could come by 2021, if not sooner.

 

They point out that the bond market is showing a big red flag (the inverted yield curve) and job openings are starting to fall, factors that normally signal downturns are coming. And they note that by just about every measure, the economy is slowing from a year ago, making it more vulnerable to a big shock like President Trump’s escalating trade war.

Where things go from here largely hinges on a single factor: the almighty consumer.

 

Broadly speaking, economic growth in the United States is driven by three factors — spending by consumers, the government and businesses. At the moment, businesses have pulled back because of the trade war, and government spending is not expected to change much, especially with a two-year budget deal in place. That leaves the consumer as the most significant variable that can change the country’s fortunes.

 

In other words, the spending levels by ordinary Americans will decide whether a recession will come sooner rather than later. And therein lies the strength and weakness of the economy: It depends on people. Their spending makes up about 70 percent of economic activity, and they rely on their gut feeling about the economy when they decide whether to make big purchases such as cars, refrigerators or fancy birthday dinners.

 

The latest data on consumer confidence that came out this week caused a sigh of relief on Wall Street and in the White House. Americans think this is the best economy since 2000, the Conference Board reported, although expectations about the future fell a tad and more people think stock prices will decline in the next year.

 

“Consumer confidence for the time being remains strong. It’s being supported by job growth and income growth and a lot of the fundamentals,” said Lynn Franco, director of economic indicators at the Conference Board. But Franco added a warning, “If the trade war begins to translate into higher prices, that could have implications for consumer spending.”

 

 

Click on the link for the full article

[Larry]

15 minutes ago, China said:

Where things go from here largely hinges on a single factor: the almighty consumer.

 

Granted, I'm an economic idiot.  But I have to confess, it really makes me think there's Something Wrong With This Picture when it seems that the most important part of our economy is how much **** consumers spend mponey on.  

[bearrock]

44 minutes ago, Larry said:

 

Granted, I'm an economic idiot.  But I have to confess, it really makes me think there's Something Wrong With This Picture when it seems that the most important part of our economy is how much **** consumers spend mponey on.  

 

Tbf, someone needs to spend to drive the economy.  Of course if consumer spending is based on unsustainable access to credit, you may be headed for a crash.  Ideally, you would like government, business, and consumers to spend money they already have or they can reliably count on acquiring in the future.  That ship may have sailed to a certain extent though.

[PleaseBlitz]

1 hour ago, Larry said:

 

Granted, I'm an economic idiot.  But I have to confess, it really makes me think there's Something Wrong With This Picture when it seems that the most important part of our economy is how much **** consumers spend mponey on.  

 

Why?  What would you rather have be the most important part?

[PleaseBlitz]

https://www.wsj.com/articles/historic-asset-boom-passes-by-half-of-families-11567157400?mod=hp_lead_pos5

 

Historic Asset Boom Passes by Half of Families

Scant wealth leaves families vulnerable if recession hits, economists say

 

Quote

The decadelong economic expansion has showered the U.S. with staggering new wealth driven by a booming stock market and rising house prices.

 

But that windfall has passed by many Americans. The bottom half of all U.S. households, as measured by wealth, have only recently regained the wealth lost in the 2007-2009 recession and still have 32% less wealth, adjusted for inflation, than in 2003, according to recent Federal Reserve figures. The top 1% of households have more than twice as much as they did in 2003.

 

This points to a potentially worrisome side of the expansion, now the longest on record. If another recession comes, it could be devastating for people who have only just recovered from the last one.

 

 

[PeterMP]

"No Recession for 2020"

 

http://cepr.net/publications/op-eds-columns/no-recession-for-2020

[Corcaigh]

No one knows.

 

Market timing is statistically less effective than a ‘buy and hold’ approach.

 

There are many people who got out before the last recession and waited to get back in and lost a lot of money.

 

If you are concerned about risk you could adopt a more conservative stock/fixed income allocation, especially assuming that your stocks have outperformed your goal for the past decade.

 

 

 

[Larry]

41 minutes ago, PeterMP said:

"No Recession for 2020"

 

http://cepr.net/publications/op-eds-columns/no-recession-for-2020

 

I am a fan of the expression that economists have correctly predicted nine of the last five recessions.  

 

However, I also think we've been due for a while.  Just because they seem to happen every so often.  That's before you even factor in Trump's exploding of the deficit and his incredibly amateurishly run trade war.  (I mean, not only is he stupid enough to have a trade war in the first place, he seems to be very bad at running one.  Maybe all the people who are competent to run one said "don't".)

[Corcaigh]

There will be a recession at some point. But if you "get out" of the market can you afford to lose the gains you would have made until the downturn, and how do you know when to get back in? Statistically, market timers lose on both sides.

 

But if you are of sufficient means for your life goals, now might be a good time to take a more conservative mindset, as protecting wealth has become more important than accumulating it.

 

 

[ClaytoAli]

Consider temporary hedging using REITS for the mid-Atlantic  region.

 

Did that back in 07, looking to do it again. The government keeps this region as a pro growth market and infrastructure development is up locally. The push for warehousing and temporary residential rental development is increasing. There an uptick during credit market tightening.

[FanboyOf91]

 

 

Edited September 3, 2019 by FanboyOf91

[FanboyOf91]

Ouch!

Edited September 3, 2019 by FanboyOf91

[Cooked Crack]

 

 

[NoCalMike]

As long as the middle class is living paycheck-to-paycheck (for the most part) I don't want to hear about how great the economy is.  The strength of the economy should be measured by more than just how much stuff people are buying.  The ability to build up wealth, upward advancement, progression, etc etc etc....all should be factors.

 

It's great that consumers want to buy things, but how much money are they able to put away for the future after spending their paychecks on the necessities?  How much is going into their savings accounts in order to be prepared for some kind of emergency or disaster in their life so that they wouldn't have to use a credit card to go into debt with.

 

And speaking of credit cards, I believe there was an article from a year or so ago that showed more and more people are using credit cards for necessities.  Not sure how buying stuff with credit cards factors in and/or reflects on these economic numbers. 

[Cooked Crack]

 

[TradeTheBeal!]

So should I buy myself a slightly used Aston Martin for my 50th birthday in November?

 

Or should I hold off for a little bit?

[DCSaints_fan]

On 8/29/2019 at 3:14 PM, Larry said:

 

Granted, I'm an economic idiot.  But I have to confess, it really makes me think there's Something Wrong With This Picture when it seems that the most important part of our economy is how much **** consumers spend mponey on.  

 

Some of that **** is useful.  Think of things that improve quality of life such as health care expenses, more fuel efficient/cleaner vehicles, education, housing (to some degree), etc. 

 

[FanboyOf91]

 

[China]

5 hours ago, NoCalMike said:

As long as the middle class is living paycheck-to-paycheck (for the most part) I don't want to hear about how great the economy is.  The strength of the economy should be measured by more than just how much stuff people are buying.  The ability to build up wealth, upward advancement, progression, etc etc etc....all should be factors.

 

It's great that consumers want to buy things, but how much money are they able to put away for the future after spending their paychecks on the necessities?  How much is going into their savings accounts in order to be prepared for some kind of emergency or disaster in their life so that they wouldn't have to use a credit card to go into debt with.

 

And speaking of credit cards, I believe there was an article from a year or so ago that showed more and more people are using credit cards for necessities.  Not sure how buying stuff with credit cards factors in and/or reflects on these economic numbers. 

 

It's not just how much money they are able to put away, but how much they actually put away.  There are a lot of people that don't save even though they have the means to do so.

 

More people buying necessities on credit cards is a trend that make sense as more people get away from using cash, and credit card companies offer incentives such as cash back on purchases.  Again the issue is not buying necessities with credit cards, but whether they are paying of their credit cards each month or whether they are incurring additional interest charges by carrying over amounts month to month.  Personally, I buy a lot of things, including necessities with credit cards to get the cash back.  But then I pay mine off each month so as not to incur any interest or fees.

[BatteredFanSyndrome]

18 hours ago, NoCalMike said:

And speaking of credit cards, I believe there was an article from a year or so ago that showed more and more people are using credit cards for necessities.  Not sure how buying stuff with credit cards factors in and/or reflects on these economic numbers. 

As someone who made a career change to a different industry earlier this year financing airplanes & jets, what I see is very alarming.  Having come from mortgage, I was used to dealing with the paycheck to paycheck crowd that have normal everyday jobs.  Moving into this line of work, I see a lot of tax returns of folks making 300K+ a year via W2 that have $3K in their checking accounts, and no other real assets of note, that want to take withdrawals from their retirement to make a down payment.  The shock and awe they experience when I notify them that aircraft lenders don't want to see them borrowing to borrow and expect them to have significant liquidity over and above the down payment.  It's amazing to me the amount of people I see making a ton of money that wouldn't have a pot to piss in should they lose their job.  It's hard to even rationalize how someone can take home $12K every 2 weeks, yet still sit on $100K of revolving credit card debt month to month.

[tshile]

20 minutes ago, BatteredFanSyndrome said:

Moving into this line of work, I see a lot of tax returns of folks making 300K+ a year via W2 that have $3K in their checking accounts, and no other real assets of note, that want to take withdrawals from their retirement to make a down payment

 

Yup, making more money doesn’t mean you’re more financially savvy. For many it just means you can make a bigger mess. 

 

From what I’ve seen, people who live beyond their means don’t change their ways because they get a raise. They just live further beyond their means. 

[BatteredFanSyndrome]

1 minute ago, tshile said:

From what I’ve seen, people who live beyond their means don’t change their ways because they get a raise. They just live further beyond their means. 

That too.

 

I get a lot of flack from customers when I tell them they won't get approved because they don't have 2 years steady income verified via tax returns.  "But, look at my paycheck, I just got a huge promotion!"  It's like the moment they even get word of an increase in salary, they are immediately looking to spend it.

[Riggo-toni]

[TheGreatBuzz]

Glad we just sold our house.

[twa]

6 minutes ago, TheGreatBuzz said:

Glad we just sold our house.

 

But the recession will drive more snowbirds to Florida and increase the market.....too soon

add

https://www.tampabay.com/florida-politics/buzz/2019/09/19/canadian-snowbirds-could-get-more-time-to-roost-in-florida/

Edited September 19, 2019 by twa