The Economy: Trick or Treat

Photo by Karsten Winegeart on Unsplash

The Economy: Trick or Treat

Knock, knock. Who's there you ask? Well, the United States economy just before the 2024 presidential election.

Whether it is dressed to impress or worse than your last-minute costume for the Halloween-themed office party, remains to be seen.

Voters have their homework ahead of them this week as they weigh the numerous crucial reports coming out, numbers being given, experts weighing in, and politically-backed news articles all intent on impacting their final decision. And it has rarely been more important, as the state of the U.S. economy has been noted as voters' most crucial issue in this year's presidential election.

So as we all get deluged with the numbers and news this week, will it, or should it change how we view the economy and, at the risk of being the annoying uncle who likes to bring up politics at family dinner, change how we vote? Let's take a looksy-loo.

So is the U.S. economy a trick or a treat right now?

Let's look at a few data points, bullet point style.

• Gross Domestic Product (GDP): GDP came in at 3.0% for 2Q 2024 and 2.8% for 3Q 2024. For perspective, GDP growth for the last 10 years averaged less than 2% per year, so today’s economy seems to be humming along.

• Consumer confidence: The Conference Board said last week its consumer confidence index rose 9.5 points to 108.7, the biggest jump since 2021.

• Recession expectations: The number of consumers who expect a recession within the next year dropped to its lowest level since the Confidence Board's survey started asking the question in July of 2022.

• Wages: Wages have finally caught up with inflation after 16 consecutive months of real (above inflation) wage growth. These increases have been so substantial that real wage growth since 2020 is now positive, meaning workers are relatively better off now compared to 2020 despite the high inflation readings of the past few years.

• Inflation: The latest inflation reading came in at 2.1%, super close to the Fed's goal of 2.0%.

• Gas prices: Gas prices are right around a 3-year low.

• Stock market returns: The stock market has been incredible this year, with the S&P 500 up around 20% for the year.

You can find a few negative and/or worsening data points as well, but all things considered, I'd posit that the economy is quite strong right now.

I realize that's not the narrative out there. There are a lot of folks saying the economy is in terrible shape.

But the data just doesn't support that view.

Now, just because the national economy is doing well doesn't mean an individual's personal economy is doing well. There are a lot of people out there who are hurting. I don't want to minimize that very real pain. But I also don't think we should allow the media's naturally negative skew affect our view of the economy as a whole.

Should any of this change my investing?

In a word, no.

When we let politics seep into our portfolios, the result usually isn't good.

We talked about this in a blog post last month. As a reminder, the bottom line is that markets tend to go up fairly equally under presidents of either party. Similarly, stock market downturns are pretty evenly distributed amongst presidents/parties as well.

As an example, you would be waaaaaaaaay (perhaps adding a few more a's) better off having stayed invested during all of the past 70 years compared to if you had only stayed invested during one party's time in power and gotten out during the other party's time in power.

If you'd like a refresher on all this, see my blog post: Politics & Portfolios Don't Mix

Should any of this change my vote? 

Gosh, that's up to you. I'm not in the business of suggesting how anyone should vote! 

I'm just hoping that getting an outsider's perspective about something like the economy from your friendly neighborhood financial planner might be somewhat helpful.

Besides, I wouldn't let any of the above drive my vote. It could be argued that, for the most part, history happens to presidents instead of presidents happening to history. Of course there are exceptions, but you could say that so much of this stuff is out of the hands of a president; or a lot of it might be made possible by seeds that were planted by previous administrations. I don't think you can draw a straight line from this data to support any particular party.

So where do you land? Republican, Democrat, something in the middle? Doesn't matter to me, because I think you're great. Good luck this week!