America is Crushing It
Oh well, oh well, I feel so good today
We touched ground on an international runway
Jet propelled back home, from over the seas to the U.S.A.
New York, Los Angeles, oh, how I yearned for you
Detroit, Chicago, Chattanooga, Baton Rouge
Let alone just to be at my home back in ol' St. Lou
Did I miss the skyscrapers, did I miss the long freeway?
From the coast of California to the shores of Delaware Bay
You can bet your life I did, till I got back to the U.S.A.
Back in the USA (Chuck Berry, Linda Ronstadt, Kieth Richards)
‘America’s extraordinary economy keeps defying the pessimists’ The Economist (3/14/2024)
The United States is crushing it. Last year our economy grew 3% when most, including Wall Street, were certain we were headed for a recession. Instead, we continue to exceed expectations. Today’s high interest rates were supposed to kill economic expansion—so far, wrong. Unemployment remains under 4%, 96% of Americans who want a job, have a job and despite what you hear on cable news, wages are rising. Growth expectations for the first quarter this year were supposed to come in at around 1% but analysts are adjusting their forecasts for higher growth. The stock market, which tends to look ahead 6-12 months is up over 9% this year signaling more growth ahead. And the rally is no longer driven by a small group of stocks, but has broadened out beyond the Magnificent 7. There are 3 sectors beating tech this year, including industrials and banks.
“The unemployment rate has been below 4% for 25 consecutive months, the longest such spell in over 50 years. No wonder Uncle Sam is putting the rest of the world to shame. Since the end of 2019, the economy has grown by nearly 8% in real terms, more than twice as fast as the euro zone’s and ten times as quickly as Japan’s. Britain’s has barely grown at all.”
The U.S. Department of Commerce 1/26/2024:
“Today, the U.S. Commerce Department’s Bureau of Economic Analysis (BEA) reported fourth quarter real gross domestic product (GDP) increased at an annual rate of 3.3% in the fourth quarter of 2023 exceeding expectations. Growth was in large part due to an increase in Americans making and spending more. In addition, the economy added 2.7 million jobs in 2023.”
Despite high mortgage rates the housing sector is showing signs of improvement. From Bespoke Research:
“Investors received some positive news related to residential housing this morning (3/19/2024) as both Building Permits and Housing Starts for February came in better than expected…From a big-picture perspective, the increase in Housing Starts has positive implications…Housing Starts do not trend higher when the economy is heading into a recession…now that the rate-hiking cycle appears to have ended, good economic news is also good for equities.”
Even crime is trending lower according to the FBI as reported in the Washington Post :
“Violent crime was down 8% in jurisdictions that reported data — law enforcement agencies covering three-quarters of U.S. residents. Property crime was down 6%. Murder was down more than 15%.”
‘Bet on the Bull’ Baron's (3/11/2024)
I believe this bull market will run further. Since the end of 2021 the S&P is up just 13%. There is plenty of risk out there, as well documented by the always brilliant Ian Bremmer. He highlights the troubling war America is having with itself. This year’s presidential election will be contentious. In addition, oil prices are up 15% this year threatening the progress the Federal Reserve has made on inflation, which remains too high. Our 2nd largest trading partner China is in bed with the world’s greatest terrorist, Russia’s Putin, who recently threatened nuclear war. And trade tensions with China show no signs of cooling. Today’s high interest rates will slow the economy (as designed to cool inflation) and increase unemployment. But these are all well documented risks. It’s going to take something we don’t see coming to derail the strength in the U.S. economy. The bull market wont last forever, they never do. History clearly shows that at some point stocks will fall. We should never be surprised by a drop in the market. A drawdown in prices will give Americans a chance to get some of the $6 trillion in cash on the sidelines working. Waiting to time a pullback could be costly. I have no idea when stocks will fall, and nor does anyone else. The resilience of the American economy may be under-appreciated, but not by investors enjoying the rally.
Instead of worrying about the economy (and the market), I encourage you to address the stuff we can exert some control: saving, spending, debt, a comprehensive financial plan, a will, trusts, estate plan, medical directives and powers of attorney. Turn off the tv and your phone and spend time connecting with friends, family, and nature.
We’re here to help.
Thank you!
-randy
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