2017: The First Half Economy

At the halfway point of the year and six months into a new presidency, it is difficult to determine the state of the economy.  With many American’s seeing things as red or blue, left or right, and Fox News or MSNBC, it is hard to get a true gauge on the state of the economy and the stock market. Americans get the news they want by turning on the station that will provide what they want to hear.   Putting politics aside, Donald Trump inherited a solid economy which has continued to grow under his watch.  Gasp, did I just make both sides mad?  Midway through 2017, this is the state of the economy and the stock market.

U.S. Economy

The U.S. economy grew the first half of the year, but at a slightly slower than expected pace as consumer spending softened.  This could be a short-term reaction to the uncertainty surrounding new and vastly different economic policies coming from Washington or it could be the continued lasting hangover from consumers with the great recession still in the back of their minds.  Consumer spending drives the American economy so this loss of momentum should not be overlooked.  Time will tell whether this is a trend or just a bump in the road caused by uncertainty.

Despite a slight loss in momentum, many positives can be found pushing the economy and stock market forward.  The labor market remained strong with low unemployment and signs of wage growth bolstering stocks to trade at, or near, all-time highs.  Stocks continue to show exuberance for Washington’s perceived pro-growth agenda even with a stalled agenda and political gridlock.  Solid employment and strong corporate earnings continue to support stock prices with strained valuations.

With housing prices and the stock market increasing, the wealth effect is not discussed enough.  The wealth effect is a premise that when housing and stock prices increase, Americans feel more comfortable and secure, causing them to spend more.  Access to increased investment portfolios and home equity lines of credit add credence to this premise.  This could potentially alleviate concerns with softer consumer spending in the first half of the year.

A Look Ahead

Overall, the U.S. economy lost some momentum heading into the second half, but still has strong fundamentals.  Solid employment and strong company earnings should support domestic stock prices for the remainder of the year even with strained stock valuations.  Thus far, the markets have been unaffected by Janet Yellen and the Fed continuing to normalize interest rates.  Unless there is a shock to the economic system, the positives of the economy outweigh the headwinds which should produce a productive second half of the year.

Kevin McNab

This article is written by Kevin J. McNab. Kevin is President of ACE Wealth Partners, LLC and is a CFP®, ChFC®, and CRPC®. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views expressed in this blog post are as of the date of the posting, and are subject to change based on market and other conditions. This blog contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this blog post should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax or legal advice. If you would like investment, accounting, tax or legal advice, you should consult with your own financial advisors, accountants, or attorneys regarding your individual circumstances and needs. No advice may be rendered by ACE Wealth Partners, LLC unless a client service agreement is in place. If you have any questions regarding this Blog Post, please Contact Us. Please read our website DISCLOSURE carefully for additional information.