I was shocked that there was mashed potatoes. A few of my mentors and I taught in a remote village in the Amazon rainforest. The locals told us that an American ran a café in town; Much to our surprise, there was great food. The current strong economy could be an even bigger surprise.
Shouldn’t we be in a recession now? The biggest surprise for market watchers is how much better the U.S. economy is doing than anyone expected. The economy is impressive with strength in household goods and services, a sustained job market and strong corporate profits. Almost no one saw this coming.
Earlier this year, most analysts and even the Federal Reserve predicted that the U.S. economy would struggle due to higher interest rates. But the economy hasn’t gotten the memo because it’s accelerating even as loans are more expensive, student loan payments are resuming, and of course that pesky war in Ukraine and now the Middle East.
The same market analysts who predicted a recession this year are increasing their growth forecasts.
It’s no surprise that stocks are currently falling a bit since Treasury yields are rising so quickly. Investors who have been told how terrible everything should be are trying to make sense of this new market environment with higher interest rates.
U.S. gross domestic product is poised to hit 4% (maybe even 5%), the Composite Purchasing Managers Index has moved to a growth forecast, and retail sales remain strong. All in all, there may not be a “soft landing,” but it looks more and more like we will have a good economic landing.
However, investors remain unsettled, and for good reason. We are still seeing the delayed effects of Fed rate hikes, there are wars and rumors of wars, and the US government is spending money like your drunk uncle, driving up the national debt. All of this has led to recent market volatility.
The majority of analysts expect the economy to remain stable even if stubborn inflation persists. Of course, there is a vocal minority (many unlicensed talk radio people) who preach that inflation will crash the economy, but I don’t agree with them. I have a good feeling about the market, although I think it will continue to be volatile. Investing used to be more of a “set it and forget it” kind of thing, but with so many rapidly changing dynamics, the importance of active investment management has never been greater.
If you ever find yourself in the Amazon rainforest city of Iquitos, Peru, I highly recommend the Yellow Rose of Texas restaurant. I wonder why a talented Texan is hiding in the middle of nowhere jungle? Yes, I do, but you will have the best mashed potatoes of your life. We ate there every night and started eating mashed potatoes as an appetizer. They were a pleasant surprise, as was the current economy.
Have a blessed week!
Dr. Richard Baker is founder and senior wealth advisor at Fervent Wealth Management, Springfield, Missouri. The economic forecast presented in this material may not develop as predicted and there can be no guarantee that the strategies promoted will be successful.
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