“Mom – are we there yet? How long till we get to the beach?” This was the most common question that my four younger siblings and I would ask as the Price clan headed to the Florida panhandle each summer while growing up. An annual ten hour drive with five children is not for the faint of heart – am I right? We quickly learned that it was much more convenient to ask Mom this question instead of Dad because Mom would do the math for us. Dad would use the question as an “opportunity” to sharpen our mental arithmetic skills and we never got a straight answer.
One of the most common questions that we have received this year has been “Are we there yet? How long till the next recession?” Unfortunately, I am not my Mom in this narrative. We can’t give you a straight forward answer. But here is what we do know, history tends to repeat itself. It never looks the same but it marches to the beat of the same drum.
Our overall thoughts on where things currently stand are consistent with this summation in a recent commentary by Joe Zidle, investment strategist at Blackstone:
"We believe that the current business cycle has at least several more years left to run. The major signs that would herald the beginning of the next recession are not yet in place. Unemployment is low and likely to decline further; wages are rising, but not sharply; the Federal Reserve is tightening, but real interest rates are zero; inflation is moving higher slowly; the yield curve is not inverted; profits are increasing; and the leading indicators are still rising. Until some of these indicators change, the expansion is likely to continue."
The escalation of a trade war, though, is one of the major risks to that continuing economic expansion. Over 40% of the S&P 500's revenues come from outside the U.S., not to mention substantial amounts of inputs, so anything that makes global trade more difficult and more costly is not likely to be a net positive for the economy or the stock market. Businesses are also less likely to invest in growth-producing projects and raise wages if they are uncertain about the future trade environment, which could partially negate the primary motivations behind last year's tax bill.
No bull market will last forever. We all know that. Our best guess is that we are in the 7th inning of this bull market with a couple of innings to go but no one truly knows. The Price Group has a defined investment process for both bull and bear markets when investing client’s money. Do you have an investment strategy for when “we get there?”
Any opinions are not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no assurance any of the trends mentioned will continue or forecasts will occur. Past performance may not be indicative of future results. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Prior to making an investment decision, please consult with your financial advisor about your individual situation.