Question:
What is your outlook for the economy and the market?
Answer:
We are bullish.
Economy
- While things have slowed, they are not that bad;
- The impact of Japan’s earthquake is worse than we thought, which is contributing to the slow down;
- We believe things are looking better for the next two quarters, and
- The Fed lowered the growth outlook, but the economy continues to grow.
Housing
- Before the bubble, people paid $100,000 for a house that they could sell for $400,000.
- This was unreal.
- Historically, housing has increased in value with the rate of inflation.
- You could pay your mortgage on time for 30 years, and
- In 30 years, you would own your home and it would be worth three times what you paid for it.
- At an estimated 4% inflation per year, in 30 years, a home’s value could easily triple.
- The housing bubble distorted prices, once thy normalize we will likely see a return of the price growth at or near the inflation rate.
Investments
- If people had invested consistently through the downturn, they would be in a good place today.
- While down from the all-time high, they still are well ahead of those who sold at the bottom.
- However, only about 10% of the population did this.
- A vast majority do not have the savings they need.
Sentiment
- The average person
- Has watched their home value plummet;
- Lives in fear for their job;
- If they are laid off, it takes nearly 32 weeks to get a new job, and
- If they are older than 50, they are likely taking a job for 30% less than what they were earning.
Overall economy continues to grow
- There are more working today than during the sharp decline
- There are also more unemployed people joining the workforce.
- We are simply not creating the jobs to keep up with population growth.
- Personal income is up;
- Corporate profits are up, and
- People are saving less.
- Real estate generally leads economic growth and we are not seeing that.
Stocks
- Stocks are at their lowest relative price in 26 years
- If you look at the earnings return in the stocks, stock market should be four times the yield on bonds.
- We continue to recommend investing monthly in the stock market.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
