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False Economic Positives Could Mean Danger

August 20, 2018

If you listen to the media, it’s easy to think there is still room for economic growth and that any talk of recession is premature.

 

After all, while interest rates are rising, they’re still at historic lows. A 30-year mortgage rate in the fours is much better than the double-digit rates available in the 1980’s.

 

Plus, corporate profits are through the roof:

 

And of course, unemployment is low.

 

All of these measures are cited as positive signs that the economy is just fine. In fact, it’s better than fine – it’s a strong, growing economy.

 

But much of the rally since 2009 has been from outside factors, not organic economic growth led by business performance.

 

For instance, interest rates are low because of the Federal Reserve’s policies. And many firms’ profits are high because of stock buyback programs and accounting rule changes.

 

However, those practices are coming to an end.

 

Central banks around the world are abandoning their Quantitative Easing policies. Interest rates are rising. And, corporate profits may take a hit if trade wars come to fruition.

 

In short, the market could get rocked for any number of reasons, and that could mean strong economic headwinds.

 

As we know, the “positives” haven’t translated into real growth and abundance for most people. And that’s even scarier when you think that things could go wrong in the near future.

 

If we’re doing good now, yet people aren’t benefiting, then where will most people be if the economy falters?

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