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As we move into the last quarter of 2019, Debbie Boisselle, VP Investments for Citizens Wealth Management Group, presented her take on where the economy currently sits and items investors should consider as they gear up for year-end. She says it's important to remember how far we've come in the past decade; the S&P 500 has grown from 800 to 3000 and unemployment has decreased from 9.5% to 3.6%. "The economy has been growing for 10 years - that's the longest expansion in U.S. history," states Boisselle. She still projects S&P earnings to continue to grow slightly, but overall looks for the U.S. economy's growth to slow.
The U.S. markets continue to be affected by international markets. "Some international bond markets are below zero and those investors are looking to positive U.S. bonds for safety. This means rates don't need to be very high to be viewed as positive. With the Fed expected to lower rates at least one more time, long-term rates may become higher than short-term and this inverted yield curve traditionally signals a slowing of the economy, if not a recession," says Boisselle. She says volatility is still relatively low but it is rising.
Other factors that point to a natural slowing are fewer new jobs are being created, manufacturing is weak and tariffs continue to plague many industries which in-turn will cost U.S. households more money for purchased goods. "If the U.S. moves forward with the 25% tariff on Chinese goods, this doubles the cost to U.S. households from $414 on average to $831. This will begin to affect GDP," explains Boisselle.
So where are we headed?
Boisselle predicts slower economic growth with the GDP remaining flat at around 2.5%. She doesn't foresee any major legislation regarding healthcare or immigration being passed until after the 2020 election and feels inflation will remain steady. The biggest problem for U.S. companies she sees at this point is finding people to fill jobs.
So what's the best options for investing in this economy?
For fixed income options, focus on investment-grade bonds and mortgage-backed securities. Focus on U.S. and emerging markets, large cap and small cap stocks and look at value stocks versus growth for stability. She advises, "Stay the course. Stay invested, ride the wave. A balanced portfolio of 60% stocks and 40% bonds should provide growth as well as a sense of stability as we face this new chapter."
Citizens Wealth Management Group offers a free financial analysis to any person interested in understanding their financial position and looking for ways to plan for their financial future, including retirement plans, investing and insurance options. For more information or to set an appointment, call 800-448-0025.
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The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Stock and bond strategies involve risks including the loss of principal. Alternative investment strategies carry a higher degree of risk.