Economic Expansion - 2019 Mid-Year Market Outlook

On July 18th 2019, Gilbert & Cook hosted a Mid-Year Market Outlook luncheon and panel discussion.

Chris Cook, Chief Investment Strategist at Gilbert & Cook highlights what’s driving our continued economic expansion and what we can expect to see looking forward:

The economy is now in an uninterrupted expansion for what’s been the longest period in history - It’s also been one of the most uneven. We’ve marched forward, but we’re running at more of a marathon pace than say a Usain Bolt pace. Think of past recessions, the 2008/2009 Recession was the worst since the Great Depression. Where as a more “run of the mill” recession, like in the late 70’s early 90’s is very short-lived and life moves on fairly quickly. The most recent recession was greater in terms of the downside - it lasted a longer period - but we’ve bounced back and this growth trend has been very slow but very steady.

So, what stops an expansion? Let’s go through a normal list of things:

Spike in commodity prices

  • That could be a rise in the price of oil, cost of inputs are higher, metals go up – we haven’t had an inflationary period in quite some time, so let’s cross that off the list.

Interest Rates

  • An aggressive Federal Reserve raising in interest rates to slow down the economy. Most recent Fed move was easing, not tightening. Again, not an imminent threat.

Extreme valuations in the stock market

  • The US stock market, even on the heels of all this growth, is still valued fairly in the global economy. I don’t think that valuations are extreme, I think they’re “fair” and that doesn’t send us into a recession.

Rising Unemployment

  • We are moving in the opposite direction – at a 50-year low unemployment rate.

If you check all those boxes, just short of something major and unforeseen in our current economy, our economy is going to keep chugging along – and this recovery, this expansion is going to keep growing. If this is baseball, our economy is going into extra innings… but it’s a double header. We’ll see a brief recession, a pullback in our growth rate for 1 or 2 quarters which will give all the newscasters something to talk about, but then we’ll move on into the future and have further expansion.