Saratoga.com logo
Saratoga.com logo
  • Places to Stay
  • Things To Do
  • Food & Drink
  • Events
  • Businesses
  • Travel Guides
Saratoga Business Journal
  • Home
  • New Businesses
  • Business News
  • Business Reports
  • Business Briefs
  • Business Registrations
  • Personnel Briefs
  • Contact Us
Home  »  Economic Outlook 2017  »  Economic Outlook 2017 – Stephen Kyne
Economic Outlook 2017

Economic Outlook 2017 – Stephen Kyne

Posted onJanuary 6, 2017January 9, 2017

eco-outlook-kyne-cBy Stephen Kyne

If there’s a consensus about 2016, it seems to be that it was entirely too long. It wasn’t bad enough that it was a leap year. There was even a “leap second” on Dec. 31.

The year that killed the celebrities we loved  just wouldn’t seem to die. Now that it’s over, and Betty White is safe, we can reflect on the year that was and turn an eye toward the new year.

Once again, U.S. GDP grew as expected last year, with annual figures likely to come in somewhere in the 2.1-2.5 percent range, which has been the average growth rate since the recession. We do anticipate potential for increased growth in the coming year as many economic, policy, and regulatory headwinds dissipate. At worst, we expect the same slow growth to continue and expect the likelihood of an imminent recession to be extremely low.

Inflation also increased in 2016, to a rate of almost 2 percent, and we expect this to increase further in 2017. Some inflation, perhaps counter-intuitively, is fundamentally good for the economy. When we expect goods and services to be more expensive tomorrow than they are today, we make purchases today, which means inventories need to be replenished, which puts people to work and gives them money to spend on the things they want and need. Without some inflation, the economy stagnates.

Another driver of spending this year may be interest rates. With the Federal Reserve  finally making good on promises to increase the rates they charge banks, we’ll see that increase reflected in higher mortgage rates. The expectation of higher future rates pushes fence-sitting potential buyers into the housing market. As a result we’ve seen, and will likely continue to see, increased sales of new and previously owned homes. The same will likely be true of any purchases which are typically made on credit, including automobiles and business capital items.

An asset class that may be hurt by rising interest rates, however, would be bonds – specifically many bond funds. As newly issued bonds carry higher interest rates, the value of previously issued bonds, with relatively lower interest rates, should decrease.

These changes should be reflected in the overall value of the funds that hold them. A downside of mutual fund investing is that, even though you may watch your values decrease, any gains the funds may have recognized from any of its holdings would be passed on to you. In other words, depending on timing, you can lose money and end up paying taxes for the privilege.

That being said, this is not a call to get out bonds completely. Fixed income investments are an important component of most asset allocations, and typically perform less well as economies improve and stock markets rise. Yet they can act as a ballast when the inevitable downturn occurs.

For the stock markets, 2016 was another very turbulent year. We saw a major correction in the first quarter of the year, followed by hesitant growth as energy prices increased, and the election cycle ground on. Surprises like Brexit and the U.S. election threatened to derail the whole thing yet, so far, have had no negative impact. Understandably, many investors are still wary of both events. The effects will begin to be felt in the coming year.

For the U.S. stock markets, we think 2017 should be a profitable year, with returns easily in the 10 percent range, although that bullishness must be qualified as we weigh President Trump’s ability to deliver on his promises to decrease corporate taxes, reduce inhibitive regulation and reform prohibitive policies. If he is able to work with Congress and deliver, even moderate reforms, the economy should continue to respond well.

Specifically, we feel there is opportunity in small and mid-sized U.S. companies in the coming year, for several reasons. These companies tend to operate domestically, and would likely be less impacted by international strife, including increased populist sentiment which may result in unexpected election outcomes in France and Germany, as well as any unexpected side effects of the march toward Brexit.

Additionally, these companies are less likely to be impacted by any retaliatory tariffs, if the new president makes good on some of his more isolationist rhetoric. Thirdly, the value of the U.S. dollar has increased substantially relative to other currencies, making U.S. exports relatively more expensive, even without tariffs, which should have a more limited impact on companies operating largely within the U.S.

Internationally, we expect more of the same: countries doing well should continue to do so, those in trouble are unlikely to see much relief.

While we don’t believe the EU will dissolve, we do expect there is enough political uncertainty in the region to hamper growth. Between populist uprisings in the election booth, refugees from the Middle East, and economic uncertainty caused by poor public policy and pending trade negotiations with the UK, we feel there is reason to be cautious when investing in Europe, although we do not expect an outright recession.

With the exception of some of the smaller Southeast Asian nations, we are not overly optimistic about emerging market economies. The situation in many of the Latin American nations continues to erode. Growth in China continues to slow. Russia will be an interesting economy to watch, as relations with the U.S. may change markedly with foreign policy adjustments likely to be made by President Trump.

From a fundamental standpoint, we believe the U.S. is the most advantageous place to be invested for growth. If changes promised by the new U.S. administration come to fruition, American companies, their employees, and shareholders stand to be the biggest winners.

That being said, these are forward-looking statement, any number of domestic and international events could drastically alter this outlook. Be sure to work closely with your independent advisor to help ensure your investment strategy accurately reflects your goals and any changes in the economic landscape.

 

 

Previous Article Economic Outlook 2017 – Marty Vanags, CECD
Next Article Economic Outlook 2017 – Dennis Brobston
Subscribe to Our Newsletter
View the Latest Virtual Edition

Categories

  • 50-Plus
  • Banking
  • Banking / Asset Managment
  • Building Trades
  • Business Briefs
  • Business News
  • Business Registrations
  • Business Reports
  • Commercial / Residential Real Estate
  • Community Services
  • Construction
  • Construction Planning
  • Corporate Tax / Business Planning
  • Cyber / Tech
  • Dining Guide
  • Economic Development
  • Economic Outlook 2016
  • Economic Outlook 2017
  • Economic Outlook 2018
  • Economic Outlook 2019
  • Economic Outlook 2020
  • Education/ Training/ Personal Development
  • Entrepreneurial Women
  • Entrepreneurship
  • Environment / Development
  • Financial Planning / Investments
  • Fitness / Nutrition
  • Health / Community Services
  • Health & Fitness
  • Health & Wellness
  • Healthcare
  • Holiday Guide
  • Holiday Shopping
  • Home / Energy
  • Home / Insurance
  • Home & Real Esate
  • Insurance / Employee Benefits
  • Insurance / Medical Services
  • Legal / Accounting
  • Meet The Chef
  • New Businesses
  • Non-Profit
  • Office / Computer / New Media
  • Office / HR / Employment
  • Office/ Technology/ E-Commerce
  • Personnel Briefs
  • Retirement Planning
  • Senior Living / Retirement
  • Summer Construction
  • Uncategorized
  • Wellness
  • Women In Business
  • Workplace / Security / Legal
  • Year-End Tax Planning

Archives

  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
Connect With Us

Follow, like and subscribe to Saratoga.com on social media

Account Sign In Submit An Event
Saratoga.com logo
  • Home
  • Places To Stay
  • Things To Do
  • Food & Drink
  • Events
  • Real Estate
  • Businesses
  • Guides
  • Contact Us
  • Blogs
  • Sweepstakes
  • Advertising
Visit Saratoga.com For Everything Saratoga
Full-Service Internet Marketing: Search Engine Optimization, Website Design and Development by Mannix Marketing, Inc.
Mannix Marketing, Inc. is headquartered near Saratoga Springs in Glens Falls, New York
Saratoga.com All Rights Reserved © 2021
Disclaimer & Privacy Policy / Terms of Use / Copyright Policies

We strive to insure accuracy on Saratoga.com however accuracy cannot be guaranteed. Information is subject to change.
Please alert us if there is any inaccurate information here.

Having trouble using this site? Accessibility is our goal, please contact or email us with site improvements.