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What economic recovery?

September 9, 2013

While many of the large-scale economic indicators have been underwhelming for some time now, the recent news that many U.S. retailers experienced a significantly worse 2nd quarter than they anticipated (and the not-unrelated trend toward more pessimistic retail forecast for the 3rd and 4th quarters) casts a darker shadow. Fundamentally, this is a consumer-driven economy, and if consumer spending is not looking good for the near future, that’s a problem. Another possible complication is the much-discussed impact of the sequestration cuts.

While we have yet to really see any dramatic impact from those cuts, the sequester is, by its very nature, the kind of thing that would take some time to start having a measurable impact. Think about all of those people who have been confronted with unpaid time off and smaller paychecks; while there may not have been an immediate impact on a national scale, smaller paychecks for large parts of the population eventually take a toll.

The poor 2nd quarter retail numbers are likely due, at least in part, to the fact that many folks simply have less disposable income than they planned for. As the impact of those cuts continues to filter though, any chance of a sustained recovery will be put in even more jeopardy. Speaking of recovery, it is worth noting that, while the economy has been in a “recovery” for the last couple of years, this is unlike any other recovery we have ever seen. In essence, we’ve really just been treading water: not drowning, but not really getting anywhere. And when Bernanke cuts back on the artificial flotation that the government has been providing us with (QE 1 & 2, artificially low interest rates), things could get ugly in the markets. That quantitative easing might cause a significant quantity of unease.

Those nearing retirement who do not want to be hung out to dry by a cratering economy at the worst possible time need to keep a sharp and wary eye on economic developments over the next 6-12 months.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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