January 11, 2016


Why the U.S. economy could keep growing until 2020 (Matt Egan, January 11, 2016, CNN Money)

1.) Fundamentals are looking solid: The latest economic reports suggest the American economy continues to look like the best house in a bad neighborhood.

The U.S. added about 200,000 jobs a month in 2015, its second-best year of employment gains since 1999.

The labor strength is buoying consumer confidence, a powerful force in an economy that is mostly driven by consumer spending. The University of Michigan's consumer sentiment index averaged 92.9 last year, the highest since 2004. That's a big improvement from the 2008 low of 55.

That confidence is also driving home buying, which continues to rebound from the recession lows.

2.) Fewer Americans are drowning in debt: Consumers have been hard at work repairing their balance sheets. Morgan Stanley notes that the amount of debt relative disposable income has come down a lot. It currently stands at about 106%, down from 135% in 2008.

The ratio of payments to after-tax income has slipped near the lowest levels of the past three decades.

In another sign of improved finances, the percentage of loan balances that are over 90 days delinquent recently fell below 4% for the first time since the recession ended.

3.) Corporate America isn't overly exuberant: Morgan Stanley sees little evidence that CEOs have overextended themselves into a situation that will create a bubble. If anything, big companies are still reluctant to splurge on big items that drive growth.

...declining commodity costs, especially energy; new trade deals coming on-line; government borrowing costs are minimal; etc. 

State of Obama's Union Is Booming (Matthew A. Winkler, 1/11/16, Bloomberg View)

Market prosperity has been built on a solid economic foundation. The unemployment rate has declined the most in any five-year period since 1989, from its 10-percent peak in October 2009 to 5 percent last December. The budget deficit as a percentage of gross domestic product has plummeted 7.7 percentage points from a high of 10.1 percent in 2010, the biggest favorable reversal in at least 50 years. 

That's helped propel the value of U.S. companies to half the world's publicly-traded equity for the first time since 2001. The 10 companies with the highest market capitalization are American -- the first time that's happened since Ronald Reagan was president.

Posted by at January 11, 2016 6:09 PM