The Intelligent Investor Newsletter – July 29, 2016


A bi-weekly publication from Consultiva Internacional, Inc. (Registered Investment Adviser)

Donald Trump painted a very dark picture of the U.S. in his acceptance speech at the Republican convention. He reinforced some of the often repeated topics; crime, immigration, and the trade and budget deficits. “Fear mongering”, as some might call this form of communication, is a tactic used by many contenders, but at a time when stocks are at a record high, it seems hard to give his words much weight, at least from an economic perspective. The U.S. economy is obviously in better shape than Trump suggests. Ultra-easy monetary policies in the U.S. and abroad have greatly benefited stocks, pushing up valuation multiples. Investors seem to be focused on positive signs in the economy, such as U.S. consumer spending (see Graph I below). The Atlanta Fed’s GDPNow model, last updated on July 19, suggests that real personal consumption expenditures expanded in Q2 by an annualized 4.5%. US consumers buying houses (see Graph II below). Existing home sales increased 1.1% during June, the highest since February 2007, and the share of first-time buyers hit 33% in June, its highest level since July 2012. Lastly, U.S. real household income is at record highs, as data from the Bureau of Economic Analysis shows that on an annualized and a per-household basis, real personal income, real disposable income, and real personal consumption are up since the start of 2000 by $23,600 (24%), $22,100 (26%), and $18,500 (24%).

The U.S. economy has also passed various stress tests during the current expansion, starting with the Greek crisis in 2010, the downgrading of U.S. government debt by S&P in 2011, the plunge in oil prices in 2014, China’s devaluation of the Yen in 2015, and Brexit in 2016. Capital markets have shown the U.S. economy bounce back from each one of these events. As experienced marketers know, fear is a double edged sword. It can be effective with naive groups, but when the proof shows a different story, the crowds start to head in the opposite direction.


Intelligent Investor July 29, 2016

Intelligent Investor July 29, 2016

by Myrna Rivera, CIMA®
Founder & Chief Executive Officer




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