A Case For A Bull Market In 2020 What if the optimists are right? What if the glass is half full? Although no one can predict the next move in stocks, and you don’t want to bet your retirement on it, it’s not hard to see the case for a bull market in 2020 — even after a spectacular year for stocks in 2019. The Standard & Poor’s 500 index historically trades at a market multiple of 16 to 18 times its expected earnings. Put another way, the average share in the S&P 500 historically is priced at between 16 and 18 times every dollar of profit per share it’s expected to earn in the next year. Lately the price of the S&P 500 has been trading above the normal valuation band, at about 19 times expected earnings. Normally that would be a sign of overvaluation, but what if the market multiple continues to expand? The Standard & Poor’s 500 index historically trades at a market multiple of 16 to 18 times its expected earnings. Put another way, the average share in the S&P 500 historically is priced at between 16 and 18 times every dollar of profit per share it’s expected to earn in the next year. Lately the price of the S&P 500 has been trading above the normal valuation band, at about 19 times expected earnings. Normally that would be a sign of overvaluation, but what if the market multiple continues to expand? The latest economic data from The Conference Board on the leading economic indicators, the Census Bureau on housing starts, and the Bureau of Economic Analysis on real disposable income all confirmed The Wall Street Journal’s most recent consensus forecast of economists for an expected growth rate of just under 2% for the next five quarters and the S&P 500 index once again broke all-time high price records on the news. While you never make financial plans based on things going right, sometimes the glass indeed is half-full. Please contact us with any questions firstname.lastname@example.org or to set up a meeting, and don't hesitate to share this video with people who might benefit from our work.
Can You Spot The Hidden Trend? Can you spot the hidden trend? A major demographic trend that is driving the U.S. economy and financial markets is right here in front of your eyes, but it’s not so easy to see without a trained eye. If you knew what to look for, you’d see that China, Japan, Germany, and other major economies are grappling with a decline in their working-age population in the decades ahead, while the U.S. working-age population is expected to grow. Since growth in the size of the labor force is one of the two determinants in economic growth, it’s a key fundamental factor that will shape the future of financial markets. With the working age population stalling, Europe’s economic growth is sluggish. To stimulate the economy, Germany’s central bank has pushed lending rates into negative territory, which is unprecedented. Germany is the world’s second largest issuer of government-backed bonds and its action has depressed interest rates on U.S. Treasury Bonds. While the demographic trend is hidden in plain sight, it’s set to shape growth in major economies across the globe for the decades ahead, and it means low interest rate conditions could persist for years. No one can predict the next move in the stock market, but demographics are fairly stable and predictable. This is an important trend. Be sure your strategic investment plan — especially, your portfolio’s allocation to bonds — is in sync with this key fundamental. Please contact us with any questions email@example.com or to set up a meeting, and don't hesitate to share this video with people who might benefit from our work.
Longest U.S. Expansion Keeps Rolling Third quarter economic growth was just revised upward, and the new monthly personal income figure over the last 12 months, after adjusting for inflation, accelerated sharply. This newly released data confirms that the 10-year-old expansion — already the longest in post-War history — is likely to continue at a modest sustainable pace in the months ahead. First, let’s look at the upward revision to gross domestic product. These are the four components of economic growth — consumers, business investment, exports net of imports, and state and local government spending. Every quarter, the government issues three estimates of the growth rate. The first estimate, released three weeks ago, was for a third-quarter growth rate of 1.93%. The new figure, 2.13%, is the first in a series of three revised estimates released by the Bureau of Economic Analysis before the final third GDP figure for the quarter ended September 30th, will be released on January 10th. An upward revision of 10% is sizable, and most of it came from growth in the rate of business investment, hinting at a bottom in this key factor in the wealth of the nation. This new data confirmed that U.S. growth is being driven by consumer strength and low inflation.
With stocks hovering around an all-time record high, a growing likelihood of a Federal income tax rate hike by 2021, and the deadline for end-of-year tax tactics closing in fast, this is a timely reminder to run a reality check on your retirement income plan. An unusual confluence of tax, financial-market and political factors make this a particularly good time for high-income and high net worth individuals to check their retirement income plan. Let’s get specific about current conditions: In 2019, the federal government is spending a trillion dollars more than it collected in revenue, and at the end of 2018, the national debt totaled $22 trillion Meanwhile, changing political winds could sweep in higher federal tax rates. Managing your tax bracket now — in case of a hike in federal income tax brackets — could lower your tax bill, not just for 2019 but in the year or two ahead, as well. Proactive tax planning before the end of 2019 may be especially timely for business owners with an interest in a pass-through entity, like an LLC, S corp, or sole proprietorship.
Major economic trends are always unfolding but are hidden in plain sight. Along these, only if you know what to look for would you see the spectacular After the Commerce Department released the latest monthly retail sales figures on Friday morning, the financial press and financial cable TV reported that October’s three-tenths of 1% uptick allayed fears of a recession but was nothing spectacular. The press totally missed the hidden trend in the economic picture by not adjusting retail sales for inflation. Inflation is at a long-term low and is not showing any sign of returning anytime soon to its performance in the 1970s, 80s and 90s. A low inflation rate masks strong real growth in consumer spending, but spotting it in the current investment picture requires a trained eye. Viewed from a prudent professional perspective, the newly released retail sales data helps explain why stock prices have been breaking records. Answers to life’s questions are often right in front of us, but we don’t see them. Please contact us with any questions firstname.lastname@example.org or to set up a meeting at 919-544-0398, and don't hesitate to share this video with people who might benefit from our work.
When stocks repeatedly break new all-time highs, as they have done in recent weeks, you have to start wonder if investors are growing irrational, overly exuberant. Here are the facts. These four charts show the latest reading of key fundamental economic factors driving record financial market prices. Let’s start with the latest figures on the nation’s gross domestic product. Third quarter growth tallied by the federal government’s Bureau of Economic Analysis came in at 1.93%. The net of three of the four factors in economic growth — business investment, net exports, and state and local government spending — did not contribute to growth but consumer strength offset them and was the source of the 1.93% quarterly growth rate for the U.S.
The nation is in a trade war with China, the manufacturing sector has fallen into a recession, and an impeachment of the President fraught with political uncertainty is under way. With so many frights haunting investors this Halloween, it’s important to note that the worst stock market scares of the past year all followed actions by the Federal Reserve Board, and the Fed has been able to avert Wall Street’s worst fears. An economic growth rate of about 1.8% annually is sustainable as long as the Fed does not make a policy mistake, which is always possible. Fed mistakes have caused every recession in modern history. But a subtle trend shown here is that the nation’s central bank has been able to lengthen the business cycle in recent decades. Fed Chairman Powell has said the Fed may be able to extend the current cycle of growth in gross domestic product well beyond the 123 months already achieved. Central banks have learned how to better manage national economies, a sign of progress in the modern era that has unfolded slowly in the post-War period. Since Alexander Hamilton revolutionized central banking in 1790, the United States has learned from its mistakes. The Fed used new modern tactics to stop the world financial system from collapsing in 2008 and its three-stage quantitative easing program — a central bank tactic never before attempted in a major economy — helped refinance this long expansion. The Fed is more nimble and quick to change monetary policy before economic growth is choked by high lending-rates, and the speed of information has accelerated the time it takes to promulgate monetary policy shifts. As Halloween sweeps by and the stock market hovers near a record high and seems vulnerable to frightening risks, watch the actions of the Fed in extending the expansion. Please contact us at 919-354-0368 or email@example.com with any questions or to set up a meeting, and don't hesitate to share this video with people who might benefit from our work.
Can The U.S. Survive With Just 5% Of GDP From Manufacturing? Since September 2018, manufacturing activity plunged from record levels, and officially went into recession territory in August. Manufacturing now accounts for just 11% of total US economic activity and its continued plunge is the source of fears about the future of the American economy. Can the U.S. economy survive if the manufacturing sectors continues to shrink? Here are the facts. In 1950, manufacturing jobs were 37% of total private sector jobs. Today that figure is 10%. Some manufacturing jobs have been replaced by jobs in leisure and hospitality, sectors with lower-paying jobs; but most of the lost manufacturing jobs have been replaced by better-paying jobs in the health care sector, education or professional and business services. These are the latest projections from the Bureau of Labor Services of the sectors of the economy that will experience the fastest job creation rates over the next decade. Health care is projected to grow the fastest by far! Some 34 million new jobs are expected to be created in the health care sector! And professional and business services are expected to add 17 million new jobs to the economy through 2028, and it’s another high paying sector. Growth of jobs in the service sectors of the economy are largely a function of population growth, which means that the more people we add to population, the more jobs will be created in these sectors. Since population growth increases demand for jobs in these services, the U.S. is not only able to survive, but because manufacturing jobs are being replaced by better paying service sector jobs, the American economy can thrive even as manufacturing shrinks. Please contact us with any questions firstname.lastname@example.org or to set up a meeting , and don't hesitate to share this video with people who might benefit from my work.