No matter what phase of the retirement cycle you’re in, it helps to educate yourself as much as possible about the investment process. Whether you’re a do it yourselfer or work with a team of trusted advisers, you should understand the basics of financial planning, financial products and investment returns.
It also helps to have a basic understanding of global economics and keep tabs on the big picture of our evolving global economy. I like to monitor global economic data for trends and consider the present state of the economy when making investment decisions.
Here’s a brief summary of where our economy stands today.
The job market has been fairly strong. The unemployment rate is down to 5.9% and this is the first time it has been under 6% since 2008. Job openings are at cyclical highs. A recent weekly jobless claims report showed that claims were at a 14-year low.
The housing market has been leveling off a bit, existing home sales are down somewhat and housing prices have flattened, but new home sales are up significantly. The recent drop in interest rates could also help home sales and refinancing efforts.
Industrial production has been rising and capacity utilization is near its ceiling. Industrial production for September rose by 1%, which was better than expected. Once capacity utilization is over 80%, it requires the use of overtime and less efficient assets. The rapid advances in technology we’ve seen in recent years has been causing things to become obsolete faster and as a result the peaks in capacity utilization have been lowering.
The consumer has been doing OK; consumer debt levels are down to 1999 levels and consumer confidence is currently at a seven year high. Falling energy prices have helped consumers. One billion dollars is put into consumers’ pockets over the course of a year for every one cent drop in the price of unleaded gasoline. Vehicle sales hit a record in August at a 17.9 million unit annualized rate.
GDP, gross domestic product, grew at a 4.6% annualized rate in the second quarter and the third quarter that was just concluded is likely to come in about 3.0%, which is a strong rate of growth for a mature industrial economy. Inflation as measured by the CPI (Consumer Price Index) has been very tame. The reading for September was 1.7%, below the Fed’s target rate of 2%.
Having a basic understanding of current economic conditions can help you make some of those important financial decisions.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at www.sellacalloption.com or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.
