On November 13, FBLI service provider members got together to hear a breakfast presentation by Dan Matola, CFA, President and Chief Investment Officer of Jacobus Wealth Management.
Dan provided an overview of the current economy and what it means for family owned service provider businesses. Some key take away points:
-The US economy is picking up momentum. The third quarter GDP came in at 3 percent.
-Global growth is accelerating. The forecast is at 3.5 percent for 2017 and 2.6 percent for 2018.
-The unemployment rate has fallen to 4.1 percent, the lowest level since 2001. During the month of October 260,000 new job were added to the economy.
-The inflation rate (for the 12 months ending September 2017) was 2.23 percent for Headline and 1.69 percent for Core. The PCE measure, preferred by the Fed remains well below their target of 2 percent.
-The Fed will likely raise interest rates another 25 bps in December with the current market expectation of another two moves in 2018.
-The 10 -Year Treasury Bond is yielding 2.4 percent. Still below year-end 2016 levels.
-This quarter the Fed started the reduction of its balance sheet.
-The US dollar has recently stabilized after weakening throughout most of 2017.
-Oil prices are trading at $57.59/bbl after reach a low of $42/bbl earlier this year (up 35 percent off of the low.)
-Consumer confidence increased in October to its highest level in almost 17 years.
-Leading economic indicators remain strong.
-Home prices (20 City Case-Shiller) continue to rebound (+6 percent year-over-year) with the index just shy of the bubble-era peak.
-S&P 500 trading at 19.4x forward earnings (Dividend Yield 1.9 percent, Earnings Yield 5.2 percent).
-Earnings growth is currently at 5.9 percent for third quarter (vs expected 4.2 percent). This comes on the heels of 10. percent for first quarter and 13.9 percent growth for second quarter 2017.
In conclusion, Dan said the economy is on solid footing for right now but most are expecting the Dow to not be as successful in 2018 as it was in 2017.