Only The Good News

As seems often the case, it is the bad news that leads headlines and garners the attention of those interested in digesting news reports. In the current economic environment though it seems somewhat difficult to promote the bad news when there seems little of it. I am not saying there is no bad news, but much of the news today that is related to the market and the economy is decidedly positive, however, from my perspective this good news does not seem to get much press. So, below are highlights of some of the positive news that may be of interest to investors.

The Consumer:

The consumer segment accounts for 70% of economic growth and post the financial crisis in 2009, the consumer seems in very good shape.

  • debt payments as a percentage of disposable personal income is lower than the pre-financial crisis level and below the level at the beginning of 1980.

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  • One media focus of 'bad' news is the current increase in gasoline prices. As the below chart shows, gasoline prices and consumer confidence rose together from 2002 up until 2008, a six year rise in the price at the pump. From 2014 to the beginning of 2016 the per gallon price of gasoline fell from $3.50 per gallon to under $2.00 per gallon and consumer confidence fell. What is occurring is gasoline prices in and of themselves do not have a large negative influence on the consumer. Higher gasoline prices tend to be a consequence of a stronger economy and the consumer benefits more from a strong economy versus simply looking at the 'potential' drag of higher gasoline prices.

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  • One area that benefits due to the strength in consumer confidence is retail sales. Could retail sales be higher? Sure. But as the below chart shows, the rate of retail sales growth has been increasing since 2016. Higher gasoline prices do not seem to have detracted too much from consumer spending in other areas.
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