Okay everyone, we’ve made it. It’s time for a new year, new beginnings and a new start. We’re marching into 2017 in what appears to be a positive direction. As we look ahead, this is what we see in the economy.
Recent numbers from the holiday season show consumer confidence is the highest it’s been in more than 15 years as the holiday season showed improved shopper morale. In fact, spending records were set in four big categories including movies, cars, online shopping and guns. Low grocery and gas prices combined with strong employment are contributing factors. This consumer confidence helps to drive consumer spending. While numbers are still coming in for 2016, the latest figures show consumer spending made up around 68% of our economy in 2015. The American economic expansion and recovery has been likened to a healthy tortoise, moving slowly, but steadily down the road.
Home values are up and even though the Federal Reserve raised interest rates in December, interest rates are still historically low for home buyers. Mortgage interest rates are expected to increase, but a large spike in rates is not anticipated. Higher interest rates are not something to be feared, as they signal a stronger economy. These higher rates can even be a positive for individuals as time deposits, savings accounts, and money-market account rates increase.
The job market appears to be continuing on its path of tightening. U.S. unemployment fell to its lowest level in nine years and wages have risen 2.5%, according to the Labor Department. Several companies, including Sprint, United Technologies, and Ford are moving jobs back to the U.S. Some of this action could be attributed to President-Elect Trump, as he has been publicly lobbying for investment in America by corporations. The administration also seems to be ready to make massive infrastructure and defense spending commitments, while cutting corporate and family tax rates. However, it can be noted that plans to adjust the Affordable Care Act, immigration, and trade deals has been set on the back burner, at least for now.
Market Strategists say the current “Bull Market,” which encourages buying, should continue as long as company earnings improve. One key catalyst for corporate earnings may be a reduced tax rate from the administration. Corporate taxes are one of the last items to be subtracted before arriving at earnings. Lower corporate taxes paired with increased consumer and fiscal spending could be just what the economy needs to extend this run.
With all this commotion and news around us, it is easy to lose track of our personal financial goals. For staying on right track this year, take a moment to write down your goals in key areas you want to improve, whether it be finances, relationship or career, etc. Take your top goals and break them down into steps you can carry out each month and make sure you follow through.
CPS Investment Advisors is always available to review your financial goals and plans to ensure you are on the right track to start 2017. As Fiduciaries, we act in your best interest to reach your goals.
Sources: WSJ, Bureau of Economic Analysis, Time.com, JP Morgan Asset Management