Sowing

August 8, 2018 - Published by IAG Wealth Partners

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The National Bureau of Economic Research (NBER) acts as our country’s official economic expansion and recession referee. Given that they often do not “make the call” until 12 to 24 months after a recession starts and ends, one could say there is nothing instant about their officiating.

At their September 10, 2010, meeting the NBER’s Business Cycle Dating Committee determined that the U.S. economy hit a trough in June 2009. This means that August 2018 is the 110th month of our current economic expansion.

This economic expansion has generally been criticized for being underwhelming. Employment was too slow to recover, economic growth was very muted, and wage growth was nonexistent. Until now.

Over the last 12 months economic activity has accelerated. There are now more job openings in the United States than there are unemployed workers. Our economic output is growing more rapidly than it has since before the Great Recession.

I suspect we are likely sowing the seeds for our next recession right now.

Recessions correct illogical economic bubbles that build up in our economy. They are not pleasant, but they are necessary for our country’s long-term economic health.

The last two recessions found their roots in too much money flowing into technology companies and real estate. Odds are there is too much money flowing into something at this very moment, but it will likely be months or even years before those roots come to the surface and cause the next recession.

We are currently in the 110th month of this expansion. According to the NBER the longest economic expansion in our country’s history was 120 months from April 1991 through March 2001.

Will we break this expansion record next summer? Or will the recession seeds we are sowing right now sprout? We don’t know for sure as the future is by definition unknown.

The good news is that IAG has guided our clients through many different economic cycles since our founding in 1985. While we cannot predict when recessions will occur, we take great care in designing our clients’ financial plans and investment portfolios with the knowledge and confidence that they will occur at some point in the future.

 

Quote of the week:

 

 

John Kenneth Galbraith: “The function of economic forecasting is to make astrology look respectable.”


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