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Economic Outlook (Fall 2017)

Date: 10/1/2017

Author: Stock & Mutual Fund Hotline

The stock market has been in a positive recovery mode since the melt down in 2008. If it goes another eighteen months it will be the longest in history. The last one was from the 1980’s through the 1990’s. Our GDP figures have a way to go to catch the GDP growth of the recent past of the 80’s and 90’s, but it is starting to pick up. The length of the current expansion is impressive given the doubt many people had back in 2009 when it got started, as well as the many negative forecasts that have followed it along the way. We have remained fairly positive most of the way if you have followed our outlook.

We think there is a strong chance the economy will continue to grow over the next eighteen months. We don’t see at this time the kind of policy shifts or economic changes that would slow down economic growth enough to throw us into a recession. Some of these changes would be tight money (high interest rates), large tax rate hikes, or a shift toward protectionism, which could stifle growth. Right now interest rates are low and the Banks remain full of cash or excess reserves. We expect to see tax rate cuts coming in the near future not tax rate hikes. In other words we don’t see a recession anytime soon. This is why we remain positive about the stock market. Eventually there will be a recession. There always is one. I just don’t think at this time we will see it this year or next year. We believe if Congress and the President can get together and find a way to pass tax cuts or tax reform or both, it should postpone the next recession further.

The third quarter GDP was shaping up to be above the 3% level before all the hurricanes hit the U.S. and the wildfires got out of hand in California. As with all these events the personal tragedy, pain, suffering, and loss are left for many. Our hearts and prayers go out to those people, and their families and friends. We experienced some of it here, and for the first time in my life, I have to use my home owners insurance to repair tree damage to my house. There are several views on how these events effect the economy. Some think that the damage will cause the economy to slow and push it toward a recession. Others take the opposite view and think the rebuilding efforts will help the economy grow. When such disaster events take place we have the free markets that help the U.S. respond. The markets allow the know how, and wealth of our country to focus on the recovery.

While some believe there should be no profit from a disaster, it’s the profit that helps the recovery to occur at a faster pace. We feel any loss in third quarter will be picked up in the following quarters. These tragic events should not shift the growing economic path of the U.S. economy. Because we are free people, we overcome disasters and reach higher, because that’s what people do when they’re free.

If you have any questions or need a free portfolio review to keep you on track with your investments or retirement plan, please give me a call at the Stock & Mutual Fund Hotline.

Russ Colbert
Senior Portfolio Manager

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