Economic Optimism is Reaganesque

Economic Optimism is Reaganesque

The data is overwhelming – Americans are bullish on the U.S. economy. The polling on the economy is not a Trump poll or a conservative poll but comes from the heart of the liberal establishment media.  CNBC announced that respondents are above 50% in rating the economy as good or excellent for the first time in 11 years.

It’s not just polling, but real-life data:  Manufacturing is returning jobs to the U.S. and new plants are being built. Apple has already committed to $100 billion in repatriated cash being invested in the U.S. economy. Businesses have been giving bonuses across the country. This optimism has not been seen in decades.

In the same CNBC survey, President Trump’s approval ratings also bumped up to 42%.  That is historically low for the first year in office.  However, they are not the worst numbers ever and he’s not the only President with a low number in the first year (not ever mentioned by the media was that Bill Clinton reached the record low 37% in a Gallup poll in June 1993, his first year in office).  These numbers come during a highly polarized, media-saturated time in American history.  But the President’s fortunes are always tied to one thing – economic performance.  To quote the infamous Bill Clinton advisor, James Carville: “It’s the economy, stupid.”

As CNBC stated while releasing the findings of the poll, “Americans are finally putting the recession behind them in terms of their attitudes about the economy, and it took a change in political leadership” to make that happen. (Micah Roberts, Democratic-leaning pollster Public Opinion Strategies).

I. Data reflects soaring optimism over the American economy!

  1. 42% of Americans expect their wages to go up, highest since 2007.
  2. 41% expect the value of their home to go up, highest since 2006.
  3. 51% believe the economy is doing good or excellent, and 56% believe it will improve even more in 2018.

 But it wasn’t just the CNBC/POS polling that confirmed this buoyant mood regarding the economy.

II. Consumer confidence now at record highs!

  1. IBD/TIPP poll shows consumer confidence now at 55.1%, up 6% since December. January 2008 this number sat at 44% and dipped to a range of 39-41% from 2011 through 2014.
  2. Same poll shows 6-month confidence level at 55.5%, up 11% since January 2017.
  3. Personal Financial Outlook sits at 64% ‘GOOD’, up 8% since January 2017.

 Dare we say – “Morning in America?”

The Reagan years were the last great decade of naturally driven growth, where all sectors of the economy were expanding – manufacturing, the service sector, finance, telecom, technology, the professions, agriculture.  The 90s were not stimulated by the government but were highly concentrated in technology growth and what would become the dot.com bubble.  The 2000s boom was driven by real estate speculation and bad government policy, resulting in the banking collapse.  The stock market growth and anemic-to-flatline GDP growth during the previous Administration was from bad government policy and unconstitutional state intervention.  Finally, at long last, we may be seeing the natural order of free markets returning to normal – government gets out of the way, and capitalists provide prosperity for all of us.  People are feeling and seeing the proverbial “light at the end of the tunnel.”

 The fact is: markets go up and down.  Take advantage of these historic gains and put a wall of protection around your money with principal protected products. If you want to have your money safe from stock market losses and earning a reasonable rate of return, give us a call. Our advisors at Ty J. Young Inc. keep it simple. Call us for a free financial review at no cost or obligation! 877-912-1919

State of the Market and Economy Report

2018: State of the Market and Economy Report

We are halfway through January, and this week the Ty J. Young, Inc.  Annual “2018 State of the Market and Economy Report” will be released as a “LIVE ONLINE EVENT.”  If you registered for the event on 1/18/18 and watched it online, or you watched it after-the-fact as a recording by request, then you heard the CEO’s talking points on (I) the index annuity industry, (II) the market and the economy, and (III) what to do for 2018.

I. State of the Industry

Despite the unprecedented upward surge in the stock market, more and more people are choosing principal protection products, such as the index annuity, for their portfolio.  Whether they (A) are moving some of their winnings over the last several years off the table; or, (B) they rightly fear that markets eventually change directions, and better to be safe with some, or all, of their money than sorry. They are now realizing we are in a mature bull market, and that at some point they need protection for their portfolio.

The Index Annuity industry, therefore, is showing strong and robust numbers given the market environment:

  1. $96.9 billion in annuity business in 2016 … over $100 billion in 2017.
  2. A.M. Best – the insurance rating agency – shows some of the strongest numbers recorded for the leading insurance carriers in the industry.
  3. Index annuity business has increased 4% or more each of the last 5 years.

 

II. State of the Market and the Economy

This beaten horse has long been dead – but the news is so good it bears repeating

The Stock Market has been going up for years since the 2008 banking collapse, but nothing like the first year of the Trump Administration:

11/22/16                              –              Dow 19,000         –             2 weeks after the election

1/25/17                                –              Dow 20,000

3/1/17                                   –              Dow 21,000

8/2/17                                   –              Dow 22,000

10/18/17                              –              Dow 23,000

11/30/17                              –              Dow 24,000

1/4/18                                   –              Dow 25,000

1/16/18                                –              Dow 26,000         –              Although it may have slipped back below 26K by the time we went to print.

  1. It is the GOAT of all bull markets: the Jordan, the Bird, the Andretti, the Brady, it’s Babe Ruth … by the numbers, it is the GREATEST OF ALL TIME!
  2. It has seen a 340% gain since 2009. Bigger than the 267% gain from 1946-52 … Bigger than the 229% gain from 1982-87 … Bigger than the 302% gain from 1993-2000.
  3. And it is not just the Stock market screaming upward, it has also been US GDP and the American economy! A) GDP is up; B) Imports up; C) Exports up; D) Earnings up; E) Revenue up; F) Employment up; G) Regulations down; H) The Tax Reform Act will lower your tax bill … don’t you just want to say, “It’s Morning in America” again!

 

III.       What to do for 2018?

With such great economic data, the market is just calling for you to put more money in … right?

Maybe, but as we are seeing with index annuity premium each year, not just our clients but nationally, people are intuitively realizing they need a safe option for a large portion of their portfolio – one where you go participate in the gains of the market, but none of the losses.

There are “3 Unique Investing Strategies” to help you achieve your portfolio protection plan:

  1. Buying Low and Selling High. This seems obvious, but it is unique because hardly anyone ever does it.  Most get caught in the “irrational exuberance” of the market – the herd mentality that drives you to keep buying even though the market has been going up for some time.  A good index annuity has out-performed the market in the last 10 and 20-year periods – isn’t it time to take some profits off the table while you are still … profitable?
  2.  Applying the ‘Rule of 100’ to your money. Most people are out of cash, they are FULLY invested in this bull market.  Many are buying bitcoin, watching the talking heads and looking for the next run up to Dow 35,000.  Hedging, asset allocation, even diversification … forget it, let’s roll the dice!   The second unique” strategy returns to fundamental principles of safety, with a reasonable rate of return.  That means applying the “Rule of 100” to your portfolio.  It’s a tried and true formula that is only unique because, like ‘buying low and selling high,’ no one ever does it anymore.  Whatever your age is, subtract from 100, and that is the percentage of your portfolio you should have in safer investment vehicles.  CD’s, Treasury bonds are safe, but the one with best historic average rate of return in the GIC – the “Guaranteed Insurance Contract” – known as the Index Annuity.
  3. Taking advantage of the ‘Bonus-on-Bonus’. The third and final unique strategy for 2018 is for existing Index Annuity account holders, and that is getting the “Bonus-on-Bonus!”  This strategy is simple – a client takes their available 10% penalty-free withdrawal from their index annuity and opens a new account with it, one which offers a bonus when funded.  That means an extra 4-5-7 even potentially a 10% bonus on your money (depending on the type of account opened).  The tried and true is always the best bet:  safe, simple, with a reasonable rate of return.

 2018 has started with the market and the economy continuing their flight to the moon.  Now is the time for unique strategies that are the safe, simple way to grow your money, with a reasonable rate of return.

Call 877-912-1919 to speak with our expert advisors at no cost or obligation!

Unemployment Low: Let the Good Times Roll?

Unemployment Low: Let the Good Times Roll?

Unemployment is at a 17-year low, reported at 4.1% for the month of December.  While the pace of hiring slowed in December 2017, that is natural since we usually reach near maximum employment during the holiday season – before December 25th –  and begin to taper off from there.  But for now, all signs point towards the broader labor market maintaining the unprecedented momentum of 2017.  The good times are surely rolling … aren’t they?

The reasons for this job growth are mixed, but the biggest, most important reason has been the unleashing of the “animal spirits” in the business community – optimism is driving job creation.  That optimism has been the election of Donald Trump, or, the “Trump effect”:  loosely described as the deregulation agenda, tax cuts and a pro-business environment coming from the government, in stark contrast to the previous administration.

The deregulation agenda includes lessening the amount of paperwork businesses need to comply with, expanding energy production, and eliminating obstacles to business formation and/or expansion.  The Tax Reform Act lowers rates on both businesses and individuals, and has allowed for the repatriation of billions of dollars of overseas capital.  The pro-business environment is the signal from the administration that the government is here to help, or stay out of the way, and let the marketplace and capitalism help serve the interests of the American people.  It has been an unprecedented success so far.

 I. Positive data supports employment growth:

  1. Positive employment numbers are occurring across the board. Non-farm payrolls are up 2.1 million from the end of 2016. The unemployment rate is at 4.1%, the lowest since 2000. Black unemployment is at 6.8%, the lowest on record, ever. Hispanics are at a record low of 4.9% unemployment.
  2. Industry data is equally impressive. Construction employment up 3.1% and business services are up 2.6%. Education, transportation, manufacturing, imports, exports, and the financial sector are all up over 2016 numbers.
  3. Labor participation rate for 25-54-year-old demographic is the highest since 2010. The Labor Participation rate could be a damper on employment news (see below), but not in the prime working years, where it reached 81.9% for 2017.  That is the highest since 2010, and the 5th highest on record.  Some executives have been quoted as saying that they are “over-hiring,” since once they hire a new employee, that employee may already have secured another job somewhere else – before they even start work.

II. Not all the employment data is as rosy as it seems:

  1. Wages are up … barely. Post-war economic recoveries have resulted in robust 2.5% or higher wage growth.  That has not been the case since 2010.  This recovery has resulted in sub-2% wage growth, and 2017 was no different, clocking in at 1.4%.  Strong employment numbers should see an increase in wages, as a growing business competes for limited labor availability.  It remains to be seen whether a traditional uptick in wages will occur in 2018.
  2. Labor Participation rate (LPR) remains surprisingly low. Despite an economy growing at a plus-3% rate, LPR is stubbornly low, checking in last month at 62.7%.  So, while it is surging upwards for the prime working years of 25-54, overall it is not enjoying the same positive reports.  Even while mired in the deep recession of 1980-81, labor participation remained overall at 64%.  It reached its highwater mark in the mid-to-late 90s, cresting above 67% in 1996 and remaining there until the early 2000s.  It settled around the 66% range in the middle of the 2000s and stayed there until 2008 when it began a long, steep decline.  Checking in at 62.3% in 2015, it has stabilized and remained in that range since.  While retiring baby boomers can impact that number, the greatest impact was, of course, the 2008 banking crisis, it was the steepness of the ‘08 crisis that makes retirement an unlikely cause for the LPR decline.  Having other options, such as generous government assistance through welfare and disability, has done more damage to labor participation and “working” than anything else.
  3. Industry data hides some market concerns. Commercial loan creation in the United States is virtually zero … non-shadow banking credit formation in China is near zero and could turn negative this year … auto loan default rates in the U.S. are higher than in 2008 … without credit creation, we will see marked declines in economic activity.  How do we sustain the unprecedented “Trump effect” if bank lending for commercial projects is slowing globally?  This is not a harbinger of doom, but a reminder that the data, however positive it may seem for the market and the economy, is not completely immune to negative effects.

The improvement in our employment numbers – combined with the rapid acceleration in GDP and other critical indicators – is the direct result of the conservative policy making of the new Administration.  The “Trump effect” has been pro-growth and pro-business, and that has meant an improving labor market.  But GDP performance and the market are always interrelated, even if there is a delay in their congruence.  Bottom line, the good times may be rolling, but caution is always the prudent course in an ever-ascending marketplace.

Take the time to take some of the winnings off the table – utilize a principal protection product for some or all your portfolio.  Call today! 877-912-1919