The Consumer is Driving!
Every month we look at 10 leading economic indicators to gauge the strength of the economy. These 10 components are also complied into an index known as the Leading Economic Index or LEI for short. The latest release of LEI data was from July, which showed an increase in relative economic strength. That’s good news, right? It is, but I feel we should take emotion out of this because that is what we all want to do as investors. Most of us are rooting for a strong US economy but looking at the numbers with an unbiased eye can help us make minor adjustments to portfolio’s and perhaps obtain the edge for which we seek.
While the economy appears strong, the data does not show all roses. The manufacturing sector continues to show signs of slowing in the US. In our opinion, the US is still the place to be as the rest of the world’s manufacturing is slowing at a faster pace than the US according to the Conference Board Economic Forecast (although as stated last month we feel emerging markets are attractive from a value standpoint). In addition, much has been made regarding the inversion of the yield curve, which historically has a positive correlation to recessions occurring in following years. The third concern is with no surprise the trade war. The trade war has proved to play a major role in volatility and market movements over the past two years.
With an eye on those concerns Crosby Advisory Group has positioned portfolios for what we call cautious optimism. There is still much to like about the current economy. We saw an increase in housing permits, unemployment remains low, stock prices are historically high, and the Leading Credit Index showed improved lending conditions. US government spending has increased from previous quarters. Perhaps above all, the US consumer remains confident and is spending.
If we take the good with the bad, Crosby Advisory Group still feels the good that is happening in the economy outweighs the bad. Knowing the news can change on a dime, our portfolio’s have a tilt towards value dividend stocks with a tilt in fixed income to more investment grade bonds. In the past month precious metals were given a 1% boost to weightings in most portfolios.
Nate Crosby is a Chartered Retirement Planning Counselor and managing member of Crosby Advisory Group, LLC. Crosby Advisory Group, LLC is a Registered Investment Advisor in the state of Ohio. At any time you may request a copy of our Form ADV 2A and Form ADV 2B, which provides information about the qualifications and business practices of Crosby Advisory Group, LLC. This article is for information purposes only and should not be taken as direct investment advice for you without a consultation. Investing involves risk of loss and you should carefully consider all risks and expenses before making an investment. Crosby Advisory Group, LLC is also a licenses insurance advisor. Insurance products are serviced through Crosby Advisory Group, LLC. If you have any questions you can send us a comment by visiting our website at crosbyadvisory.com. Our office number is 419.496.0770