With so many indicators pointing to a strong economy, why then are so many Americans acting as if recession is imminent? That’s the question we’ll address here.
Ed Hyman is one of the most respected, and accurate, economists. As Barron’s recent observed, he has been voted Wall Street’s top economist for 36 of the past 41 years in Institutional Investor’s annual poll.
In an interview conducted by Barron’s editor Randall Forsyth, Hyman said he sees cities around the U.S. “booming,” including smaller ones away from the megalopolises on the coasts. His conclusion is that this will benefit Main Street more than Wall Street.
Hyman has a rather old-fashioned, yet highly effective, method of gathering data from which to make his forecasts. His team of researchers simply contact companies such as employment agencies, truckers, car dealerships and home builders and ask, “How’s business?” A rating scale of zero to 100 is used by respondents to describe business conditions and from this tally Mr. Hyman is able to get a good read on what’s happening in the economy.
According to Barron’s, Hyman’s surveys were trending higher well ahead of last year’s election. “At that time,” quoting the Barron’s article, “his model was forecasting real growth in gross domestic product of about 1.5%, although not as ‘uplifting’ as the recent ‘soft data,’ such as confidence surveys, indicate. Now, the model points to 3% growth, bolstered by indicators such as tight credit spreads and high consumer net worth, which accords with what he calls a ‘scientific method.’”
Ad Ed travels around the country, he’s finding that “every place is booming,” he told Barron’s. “Every major city, Chicago, Minneapolis, Kansas City, they’re doing great.” Smaller cities are also outperforming, he says.
Hyman also reports that “millennials are coming on like locusts,” as they emerge from years of living in their parents’ basements. “They’re getting jobs and apartments,” he told Barron’s. “Millennials’ employment is growing at 3% while everything else is growing 1%.”
Hyman also pointed out that many observers have undervaued the extent to which central banks around the globe “are still flooding the system every week” with liquidity, with the Bank of England and the ECB having purchased more than two trillion euros’ ($2.14 trillion) worth of bonds in less than three years. Meanwhile the BOJ and the Federal Reserve, along with the ECB, hold $13 trillion in assets, which has lowered interest rates around the globe. This, he says, explains how the Fed funds rate at just 0.80% while U.S. companies are doing so well.
If Hyman’s macro optimism is to be believed – and our indicators strongly suggest he is right – then 2017 may prove to be the year that the U.S. economy finally takes off and leaves investors with no doubts as to its latent strength and momentum.
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Clif Droke is a recognized authority on moving averages and internal momentum. He is the editor of the Momentum Strategies Report newsletter, published since 1997. He has also authored numerous books covering the fields of economics and financial market analysis. His latest book is Mastering Moving Averages. For more information visitwww.clifdroke.com
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