As part of our work with wealthy families, we often see content we find interesting and relevant from the financial media. One topic that we have found to be widely popular among our clients is the future of the U.S. economy. Below are three articles from Advisor Perspectives that we recommend as sources for different perspectives on how to tell what the future may hold.
Don’t Fear the First Rate Cut by Urban Carmel discusses how investors’ fears surrounding the Fed’s potential rate cut may be unfounded. In fact, equities typically rise after the first rate cut. Equities have only consistently traded lower if they were already performing inadequately.
This Time It’s Different dives into how investors are told “this time is different” on a variety of future economic and market performances, specifically the following, listed verbatim from the linked article by Howard Marks:
There doesn’t have to be a recession.
Continuous quantitative easing can lead to permanent prosperity.
Federal deficits can grow substantially larger without becoming problematic.
National debt isn’t worrisome.
We can have economic strength without inflation.
Interest rates can remain “lower for longer.”
The inverted yield curve needn’t have negative implications.
Companies and stocks can thrive even in the absence of profits.
Growth investing can continue to outperform value investing in perpetuity.
Unfortunately, for any of those to be true - it truly does have to be different this time.
The Economic Cycle Research Institute (ECRI) Weekly Leading Index Update by Jill Mislinski is an insightful look at the publicly available date and includes its Weekly Leading Index (WLI), which measures signals from an array of leading indexes designed to anticipate cycle turning points. ECRI’s latest piece also discusses the ability of GDP to predict recessions in real-time. According to the article, “GDP data tells you nothing about recession risk.”