As we approach the first official day of summer in 2021, we wanted to send some good info from a recent conference we attended. Our Investment Committee had a unique opportunity last night to listen to some of the brightest economist in the US , including - Brian Wesbury, and here are our notes that we wanted to share with you all. Please take a few minutes to read some of the snippets below. As always, let us know if you need anything or have questions.
- The United States is currently generating all time corporate profits of over 20%, all while operating at 90% of pre-COVID capacity. What happens when we get back to full capacity?
- The United States will always find a way to evolve. During a global pandemic when people were stuck inside their homes delivery times were cut down by two-thirds. We now have same day delivery on just about anything you could want or need.
- US debt to GDP has been increasing over the last 90 years but we have still been growing and prospering. Not Pollyanna and need to address debt but we could have said this as the debt rose over the last 90 years and been pessimistic.
- Commodities as an asset class have been in a 12-year downtrend, which recently reversed. These cycles are not typically short term and instead last several years. We are watching this closely.
- Inflation is likely to run hotter for the next 4-5 years at an average of 3-4% per year
- Retail sales are up 18% from pre-Covid. Although spending will continue to rise, this is not sustainable.
- COVID data points: Remember, this is just data and not discounting the many lives that have been affected by this virus.
- Cases are down 98% from their peak in December (source: CDC weekly data 5/31/20-5/23/21)
- Deaths are down 95% from their peak in December (source: CDC weekly data 5/31/20-5/23/21)
- Non-defense government spending: We, along with many of our clients have voiced concern with the growing debt / spending and we continue to feel decisions need to be made to address long-term…. but, our debt levels have been consistently rising since the 1930’s and our nation has been extremely prosperous. (Source: 1930-1939 data from Historical statistics of the USA. Colonial Times to 1970, 1940-2020 data from the Office of Mgmt & Budget. All data is fiscal year.)
- Market outlook: Thinks cities, states, countries re-opening will push market higher over the next 12-18 months but from there it is anyone’s best guess.
- Despite being only 4.2% of the world’s population, the US generates almost 25% of the world’s wealth!
- Taxes: Over time, tax rates have been all over the place, at the same time collectively as a country we have never paid more than about 18% of GDP. If rates go up, people will adjust and change behavior based on the rules. You cant change the system and not expect people to not react.
We leave you with this great quote from Jim Bowen, CEO of First Trust Advisor, L.P.
“Keep your head up and look around at many of the good things going on as opposed to your head down on your phones and in social media at all the negativity!”
As things continue to get back to normal, enjoy time and memories with loved ones you may have not seen in over a year. Life is too short to be angry at each other or to bury your head in the news.
If there is anything we can do for you and your families, do not hesitate to reach out!