We’re more than a decade into a bull market, and coming off of 2019’s remarkable returns, we’re hearing from clients who are understandably concerned about whether the good times will continue to roll. Chief Investment Officer Jim Lowell discussed politics and the Fed in our recent quarterly webinar*: 2020 Conflicts—Impeachment, Tariffs & Global Dysfunction.
Please enjoy the excerpt below and click here for the full webinar replay to hear more.
Jim Lowell: Here’s a client question asking whether or not this bull run is near to its end and what sort of signs might manifest themselves to give us a clue that a bear market is turning the corner?
Jim Lowell: Right now, we say here in the investment team that we think we’re closer to a recession than we were a year ago or two years ago, but that we have really no fundamental facts that suggest any clarity as to whether or not a recession is around the corner in a year or two years or three years. One of the things that we focus on squarely is the strength, the health of the U.S. consumer, both from an employment perspective, from an income perspective, from a savings and spending perspective, as well as from a household debt perspective. And so long as the U.S. consumer remains fully employed, we think that the slow-growth, not no-growth economy here in the U.S. is likely to have some legs to it.
Jim Lowell: We also look at things that the consumer buys as potential early tales of cracks in what’s been a very consistent and profitable road. So for example, if we began to see pending home sales begin to dip, if we see home prices begin to slip, if we see time on the market for houses begin to increase, that might be one of the things that we’d look at as a sign that the U.S. consumer may be facing a hurdle in the future.
Jim Lowell: But that said, we are not seeing those hurdles yet. When we look at the employment picture here in the U.S., when we look at income spending and savings, there’s no reason that the U.S. consumer shouldn’t be as confident as they are except for all the reasons that [Chairman] Dan [Wiener] had noted at the outset, which is that this market has in the last 18 months seen extraordinary geopolitical and event-driven hurdles. All of which we’ve been able to overcome thanks to the fundamentals— earnings remaining relatively strong, interest rates remaining relatively low, economic data remaining steadfast.
*Webinar recorded after the market closed on January 23, 2020.
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