Investment pro eyes continued economic expansion
The long-running U.S. economic expansion isn’t ready to end but seems unlikely to pick up a lot of steam, a top investment professional said Tuesday.
Now 98 months long, the expansion, with average gross domestic product growth of 2.1%, is one of the weakest the nation has had, said Mary Ellen Stanek, chief investment officer for Baird Advisors in Milwaukee. But it has had stamina. “We think this lower, longer theme has legs and have reason to believe the expansion ultimately could break the postwar record of 120 months set over the course of most of the 1990s,” Stanek told the annual Baird Advisors Institutional Investors Conference in Kohler. Stanek, who is managing director of Robert W. Baird & Co., said the most powerful tailwind for the economy may be consumers, whose confidence levels are at or near multi-decade peaks.
“Regardless of one’s political leanings, one thing is clear: The 2016 change election brought U.S. consumers a burst of optimism,” she said, according to a written copy of her remarks to the group. “And with consumers representing nearly 70% of U.S. economic activity, sentiment matters.”
Still, she said, there’s some evidence the “Trump bump” is lessening as the administration has found its campaign promises of regulatory rollbacks, infrastructure spending, tax reform and the repeal of the Affordable Care Act hampered by “the realities” of governing.
“But, so far, consumers show no sign of returning to a pre-Trump state of funk,” she said.
Stanek said jobs data remains solid with the unemployment rate at 4.4%, and overall consumer inflation is benign at 1.4%, which is below the Fed’s 2% long-term target.
The housing market has recovered, but one potential drag on the housing market is the “massive overhang” of student loans.
“Americans have trimmed most consumer credit since the crisis, but student loan debt outstanding has climbed to more than $1.3 trillion, and delinquencies remain high,” Stanek said. “Mortgage lenders are creating workarounds to qualify student loan borrowers but, more generally, the student loan burden could weigh down young Americans in what should be their prime years for economic activity.”
She said that while the banking system looks much stronger than before the recession and profitability is up, lending isn’t booming.