Stay the course as economy wavers

Taking a look at the U.S. economic outlook as we cruise past the halfway mark in 2017 is a tricky undertaking. Confidence abounds, but as always there are danger signs as well as green lights.

On the positive side of the ledger, the stock market has continued moving into record territory, with the Dow Jones average and the S&P 500 soaring 8 percent through late June and Nasdaq up 16 percent. Many investors and financial advisers are betting that President Trump will be able to cut taxes, grow jobs and trim government spending.

The Federal Reserve expects real GDP to grow 2.1 percent to 2.2 percent this year, a slight increase from its previous outlook. The Fed predicted a drop in the unemployment rate to 4.2 percent to 4.3 percent, revised from its previous estimate of 4.5 percent to 4.6 percent. And the Fed projects a drop in core inflation to 1.6 percent to 1.7 percent, down from its previous estimate of 1.8 percent to 1.9 percent.

The nation’s CEOs are bullish: A June survey by KPMG shows 46 percent of 400 CEOs surveyed are “highly confident” the U.S. economy will grow over the next three years, up from 32 percent a year earlier.

Finally, the global economy is picking up, according to the International Monetary Fund. A recovery in investment, manufacturing and trade is expected to fuel global growth of 3.5 percent in 2017 and 3.6 percent in 2018, up from 3.1 percent in 2016, according to the IMF’s World Economic Outlook from April.

On the negative side, the nation remains in the third-longest bull market in its history, and all good things come to an end. Valuations of many stocks are historically high, and it’s not difficult to find economic prognosticators who maintain a market correction in imminent. On the other hand, some economists say there is no compelling reason the good times must come to an end any time soon.

In addition, a worldwide oil glut sliced oil prices 22 percent between January and late June, plunging the energy sector into bear market territory. As a result, energybased mutual funds and ETFs have fallen, and analysts worry the trend could dampen inflation expectations, throwing a wrench into the Fed’s ongoing effort to raise interest rates.

The best bet for investors remains “safety first” — set aside some cash in your investment portfolio, and assess whether you need to rebalance your portfolio.

Above all, remain calm and stay the course, without paying too much attention to the screaming headlines warning of an impending crash or promising outsized stock market gains.

As a Certified Financial Planner and Investment Advisor, I often remind people that emotion has little place in the investment world. Based on market current valuations, I would recommend that you take inventory of your holdings, assess your financial plans and invest with a well thought out strategy.