economic update

Optimism isn’t a word we hear much lately. Most economic talk on the news is downright terrifying. But we’re here to tell you that things are actually looking up. Did you miss our recent Third-Quarter Economic Update Webinar? View the recording now.

Third Quarter of 2020 Economic Update Summary

Here are the facts about what happened in the U.S. economy in Q3:

  • Unemployment is recovering—at a much more rapid pace than we’ve seen in past recessions.
  • People are feeling confident enough to quit their jobs again, much of the time for a higher-paying job. This is a sign of some remarkable underlying strength within the economy.
  • Consumer spending is back up. We recognize some industries are still struggling, as people are spending money in different ways and on different things, but overall spending is an encouraging sign of recovery.
  • GDP rebounded 31.4% in the 4th quarter. Despite the Q1 crash, GDP is actually up for the last 4 quarters by 1%.

The markets are also improving and showing strong year-to-date performance. We believe this is happening for two reasons:

  • The data reflects that the markets are staying true to economic fundamentals.
  • We now have a much better understanding of the COVID-19 virus than we did at the beginning of the year.

Many people ask how the turmoil around the election will impact the market and our response is always the same—less than you’d expect. If history repeats itself, as it usually does, policies and politics will have very little impact on the growth and strength of the stock market. It’s uncertainty that tends to negatively impact the market. We expect to see any turbulence level out as time passes and the news moves on from election politics.

As we move into Q4 of this year, we encourage you to take a step back and look at the big picture. There are many reasons to be optimistic about the future of our country and our economy:

  • Almost all markets show increases for the year, despite the big dip in the spring.
  • Unemployment claims continue to fall, and we expect further decreases in unemployment with holiday season hiring. This is a much faster jobs recovery than we’ve seen in past recessions.
  • Use of the Federal Reserve’s credit facilities has been far lower than expected, meaning that the Fed still has significant resources available to deploy should they be needed.
  • We expect inflation and interest rates to continue to remain low for the next few years.
  • Global demand for the dollar remains strong (interest rates are actually even lower overseas than they are in the U.S. at this time).

In our first-quarter economic update this year, we pointed out that the market always comes back up again over time. True to trend, it has. This is why we continually emphasize the importance of not making decisions based on emotion. Selling out and going to cash isn’t the right thing to do. Staying invested and investing wisely in great American businesses is the best way to build wealth and continue to accumulate wealth. Remember, your long-term financial success is not about timing the market, but time IN the market.

Are you still unsure about your investments? Sign up for our next webinar, scheduled for November 10th at 10:00 am EDT. We’ll discuss the outcomes of the election, as well as how investors should respond. Spoiler alert: we aren’t going to recommend selling your stocks.

Special thanks to Matthew Treskovich, Chief Investment Officer at CPS Investment Advisors, for sharing his insights on this webinar.