Looking Past the Election

November 7, 2016

 This week we will choose the next president and can finally move forward and re-focus on the many economic factors that have a greater short-term impact on the markets. With the media following each of the latest polls with intense scrutiny, it has been easy to miss out on what has been happening in America’s economy lately. Here is a quick recap of what is going on.

 

 


Oil Prices

 

Oil prices remain low but seem to have found a new trading range for the immediate future. At this point, it seems like the future cuts of oil investments have come to an end and for now, at least the reduction of rig counts will stop. Any surprise to the upside in oil demand (or lower supply from overseas) could be a positive for the economy, increasing capital spending.

 

Home Sales

 

Home sales continue to push upwards and the fear of kids living with their parents forever seems to be overblown. Single family home starts have grown 8.1% which is a nice and healthy growth rate that might help keep prices from rising too fast. Permits which typically are an economic indicator for the future are up 6.3% which could indicate the economy still has room to grow.

 

Auto Sales

 

Auto sales are finally slowing down which could mean a multitude of things. Most likely the pent-up demand after the delay of purchasing during the great recession has played out and we are returning to a more stable purchasing rate. With gas prices coming down as well, the push to more energy efficient cars has also slowed.

 

Unemployment

 

Unemployment has continued its downward projection and we are essentially at what the Fed considers “full” employment. What this typically translates into is higher wage growth which would be a nice change given the slow rate of the past several years. The U.S. is already leading the world with increases of about 2.5% and indications that it could go higher.

 

Conclusion

 

Once the election cycle has played out, hopefully, the country can refocus on the economy and remember that things are not nearly as bad as many of the commentaries have made them out to be. Barring any significant shocks, the economy is in a fairly stable mid- to late-cycle growth pattern that could be maintained for at least a year or two. The trick now for whoever gets elected is to not mess that up.

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