Front Page|Our Services|Our Team|Client Center|Financial News|Events|Contact Us

Financial News

More Articles  Printer Friendly Version

 

A Dramatic Pause, As Expansion Breaks Longevity Record

With the start of the second half of 2019, this expansion officially sets a new record as the longest growth cycle in modern U.S. history. However, growth has moderated lately. The U.S. Leading Economic Index (LEI) in May was unchanged from April. It's a dramatic pause after 10 years of strong growth.

"While the economic expansion is now entering its eleventh year, the longest in US history, the LEI clearly points to a moderation in growth towards 2% by year end," according to the economic team at The Conference Board, a big-business sponsored group that is responsible for tracking the monthly U.S. LEI.

From The Great Recession of 2008, which was the worst period of negative growth since The Great Depression, the current growth cycle began in April 2009, and GDP grew only modestly until 2015. Then, real wage gains began accelerating, propelling stronger than expected growth for over four years. Though U.S. growth recently leveled off, it's been a spectacular expansion, by modern historical standards.

The Federal Reserve was nimble in reversing its interest rate policy in recent weeks, as fear of trade wars and, now, a real war with Iran, heightened uncertainty, and the expansion is poised to extend into 2020. However, the Fed has not always been accurate in the past in forecasting the economy. Far from it!

The Fed caused every recession since 1954 by misreading the economy, tightening credit too much and choking growth. They came close to doing it again earlier this year, but their quick about-face in May has enabled the long expansion to continue for now.

Fritz Meyer, an independent economist whose research we license, says the Fed's fear of inflation is overblown. Since this expansion began, the Fed's forecast for inflation has been wrong, he says. The Fed's policy reversal in recent weeks, articulated in its public pronouncements in May and June, indicates that the Fed could be rethinking its inflation model.

Watch for the Fed to show less fear of inflation in the months ahead. A tectonic shift in the way the Fed views inflation could fuel continued growth. Or the Fed could make a mistake.

The big picture significance of this chart is that the LEI has historically rolled over very definitively months before recessions in the past. Hence, the pause in the LEI is pregnant with drama.

The Standard & Poor's 500 index broke another all-time high with its closing price of 2,954.18 on Thursday. The index closed on Friday at 2,950.46.


This article was written by a veteran financial journalist based on data compiled and analyzed by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial or tax advice without consulting a professional about your personal situation. Tax laws are subject to change. Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. No one can predict the future of the stock market or any investment, and past performance is never a guarantee of your future results.


Email this article to a friend


Index
Slower Growth Confirmed By June Leading Economic Indicators
Stocks Closed At A Record High; Should You Worry?
Amid Record Stock Prices, Fed Policy Is A Risk
Uncle Sam Delivers A Strong Economy
The Explosion In Real Retail Sales You Never Hear About
Amid Signs Of Weakness, Fed Reverses Course; Stocks Rally
Three Stories Affecting Your Wealth This Week
Buried In The Fed's Financial Stability Report, A Potential Risk To Investors
Forget Everything You Know About Inflation
China Trade War Sparks Fear But Not Stock Losses
Surprisingly Good Productivity, Jobs, Inflation And Trade News
Stocks Break Record High On Economic Surprises
U.S. Leading Indicators, Retail Sales, And Atlanta Fed Forecast Signal Strength
S&P 500 Closes Near Record High Amid Growing Ebullience
An Early Indication The Economy Is Stronger Than Expected

This article was written by a professional financial journalist for Vantage Point Financial Services, LLC and is not intended as legal or investment advice.

©2019 Advisor Products Inc. All Rights Reserved.
© 2019 Vantage Point Financial Services, LLC | 329 Regency Ridge Drive, , Centerville, OH 45459 | All rights reserved
P: 937-432-1111 | F: 937-432-1110 markblack@vantagepointadvisor.com |
Contact Us

Privacy Policy

Securities offered through First Allied Securities, Inc., A Registered Broker/Dealer, Member: FINRA/SIPC. Advisory services are offered through First Allied Advisory Services, Inc., A Registered Investment Adviser.

This site is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security which may be referenced herein. We suggest that you consult with your financial or tax advisor with regard to your individual situation. This site has been published in the United States for resident of the United States. Persons mentioned in this site may only transact business in states in which they have been properly registered or are exempt from registration.