Tea leaves predicting little chance of recession
“I don’t look to jump over 7-foot bars. I look for 1-foot bars that I can step over.”
With most of the economic tea leaves predicting little chance of an oncoming recession there are few reasons the equity market should not continue higher.
New highs seem to be a concern for many of the less informed but consider the number of new highs the market has achieved over its history. Market acrophobia seems to be a real disorder. Of course, the path to higher highs is not predictable or linear. Retractions are inevitable, but as long our economy has growth in labor and productivity, market prices will reflect the same trajectory.
“Buying the dip” strategy has been and should continue to be an effective way to gain new or increased exposure to equity markets. Why? Inflation remains contained, which should keep the Fed in a more accommodative mood. The PCE index (Fed favorite) has year over year core inflation at 1.7%. This is well below the targeted rate of 2%. The job market remains tight with U-4 predicted at 3.7% in 2019 and 3.8% in 2020, yet wages are showing only modest increases. Even the broadest measure of unemployment U-6 is now at 6.9%, the lowest in almost 20 years.
With the Fed supplying liquidity and consumers getting paychecks, our economy driven predominantly by consumer actions should grow. Manufacturing has suffered a slowdown but even now this looks to be on better footing.
But forecasting matters of the economy will never be so simple. Potholes in the road to accuracy are numerous. Trade talks, out-sized inflation, slowing consumer spending, or the bursting of a now unidentified asset bubble could change the narrative. For now, stay invested, stay diversified, and stay disciplined. In markets, what goes up does not have to come down.
As you consider the information provided with the Salt Creek Investors Asset Allocation Platform (the “Program”), please review the following:
The information and descriptions provided about the Program are for educational and information purposes only and should not be used or construed as investment advice, an offer to sell, a solicitation of an offer to buy, a recommendation for any security, or suggest any course of action. LaSalle St. Investment Advisers (“LSIA”) does not guarantee that the information or descriptions supplied about the Program are complete or timely. LSIA makes no warranty with regard to any results obtained from the Program or its deployment. LSIA is not responsible for any direct or incidental loss incurred by relying on information provided about the Program. The allocations presented herein are illustrations and completely hypothetical. None reflect actual investments or investment results and do not reflect allocation of any individual portfolio. Asset allocation and its results vary over time. Other allocations or asset investment categories not offered in the Program may have characteristics similar or superior to those illustrated. Past performance of any model or allocation is no prediction of future results. Neither the Program nor any system/model can predict the future of any market or price movement in a market. Diversification and asset allocation do not guarantee against the risk of investment loss, including risk of loss of principal. Information provided regarding the Program is as of the date of publication and may change at any time without notice. Information has been included which was obtained from third parties and is believed to be reliable and complete. LSIA does not warrant the accuracy or completeness of such information. LSIA is a registered investment advisor and does not provide tax, accounting or legal advice ‒ the information and/or descriptions provided do not constitute such advice. More information regarding LSIA and its investment strategies can be found in the LSIA brochure, ADV Part II, which is available online or through LSIA. Asset allocation may not be suitable for all investors. Before deciding to invest, potential participants should consult with an investment adviser to determine an appropriate investment strategy and methodology which meets the investor’s specific financial needs, objectives, goals, time horizons and risk tolerance. The information and description provided herein has been made without consideration of any investor’s particular suitability for investing in the Program. Asset allocation also involves investment in various asset classes which are not insured by the government. Investing in fixed income and/or high yield securities involves additional concerns including interest rate risk, credit risk and reinvestment rate risk. Investing in securities outside the United States may entail greater risk than investing in domestic U. S. markets. These risks typically include political and economic uncertainty of foreign countries as well as currency exchange fluctuations, including foreign currency exchange rates, political risks, different methods of accounting, financial reporting and foreign taxes. The prospectus accompanying a security should carefully be reviewed before investing. The services described herein are available to persons residing in any state where they would otherwise be contrary to local law or regulation.
Copyright © 2019 LaSalle St. Investment Advisors, LLC., All rights reserved.