Mind on Money: Economy continues to plod forward.
This week our beloved Spanish exchange daughter Ane returned from Spain to our home to spend most of the remaining summer. Ane spent the 2017-2018 school year with us, and visited again in 2019. My wife and I were supposed to travel to her region in northern Spain to visit for my 50th birthday in May 2020, but COVID put an end to that plan in rapid fashion.
Despite the challenges of being on different continents, the bond formed between this delightful young woman and our family is very strong. Somewhere along the way she got elevated from exchange student to exchange “daughter,” which is the position she now occupies in our lives. It was wonderful to see her in person after three long years.
Ane is now entering her fourth year at the Universidad de Navarre in Pamplona, Spain. She is studying international relations, and from time to time asks for my help reviewing her writing assignments, which are composed in English. I’ve always found her curriculum to be impressive and challenging. I am also often amused to see how her program and professors present the history and status of the U.S. in international relations. For the first two years of her schooling, I thought her education resembled an American history major as much as an International Relations program. The Europeans seem much more focused on us over here across the pond, than we are on them.
One of the most interesting benefits of maintaining a relationship with Ane is talking to her about Spain’s economy, the economic and political state of mind in Europe and the European view of the state of the U.S. Her family is affluent but middle class. Her Mom is a dentist, her Dad is an administrator in a hospital system. She has always seemed to have a level of economic confidence in her family’s financial security, but now as an incoming college senior she is starting to become focused and concerned about her own plans after graduation. Or in other words, where she will find a job.
On the way back from O'hare, Ane complained that it used to cost 25 Euros to fill a gas tank in Spain, but now it costs 50 Euros. The same applied to dinners out with her friends, which used to be 10 Euros and are now 20. She said people in Spain didn’t like President Trump, but now wish he would come back as they think President Biden is “terrible.” She said Putin and the Russians are ruining everything in Europe, which was recovering from COVID but is now caught up in a “stupid war.” She is worried about things “slowing down” in Spain, but hasn’t really noticed it yet. She was quite delighted that Americans who came into the bar where she worked didn’t know that Europeans don’t tip, and the Americans would “give money out” anyway.
Ane’s European perspective is interestingly not far off from that of my oldest daughter, who is eight years older and well established in her tech marketing career. My oldest sent me a text this week saying she thinks we are in recession because Linked In is filled with people who have been laid off or had their employment offers rescinded. The text also complained she and her husband went to Dairy Queen this week and ordered exactly the same treats as last week, but the price was $1.30 higher, which amounted to a 16% DQ inflation rate. Oh, the outrage.
As I sit down with clients every day, I feel like the whole economic world is waiting for some type of “next shoe” to drop. The stock market skids along the bear market threshold, the consumer confidence index capitulated this week to the lowest level since 2013 (source: Reuters), the Atlanta Fed is predicting zero or tiny GDP growth in the U.S. during the second quarter with its GDPnow indicator (source: Atlanta Fed). As an investor it all just seems too obvious, and that, my friends, is what brings me pause and maybe even a little hope.
In my experience, investing and economics are never easy or obvious. The very nature of the endeavor of being an investor requires that the common wisdom be questioned — not necessarily denied, but always questioned.
The first obvious non-predictive indicator of an economic slowdown will be unemployment claims and jobs created, and for the first five months of the year the U.S. economy has been creating an exceptional average of almost 500,000 jobs per month (source: BLS). Investors will need to watch this number closely over the next few months, but for now the American economy continues to plod forward, so let’s try not to talk ourselves into a recession.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stock investing includes risks, including fluctuating prices and loss of principal. Precious metal investing involves greater fluctuation and potential for losses. Past performance is not a guarantee of future results. Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company. Marc Ruiz is a wealth advisor and partner with Oak Partners and registered representative of LPL Financial. Contact Marc at email@example.com. Securities offered through LPL Financial, member FINRA/SIPC.