The “Heat Map”

Posted on October 16, 2018 by The Weekly Commentary

US ECONOMIC HEAT MAP
The health of the US economy is a key driver of long-term returns in the stock market. Below, we grade 5 key economic conditions that we believe are of particular importance to investors.

CONSUMER SPENDING	A+	Consumer spending is expected to remain healthy as individuals with lower tax rates spend their windfalls.
FED POLICIES	C-	In September, the Federal Reserve raised interest rates for the third time this year. Rising interest rates tend to reduce economic growth potential and can lead to repricing of income producing assets.
BUSINESS PROFITABILITY	A	Factset is reporting a blended earnings growth rate of 20% YoY for the 2nd quarter of 2018. Tax reform has played a major role, but the strength of the US consumer is boosting corporate profits as well. Q3 earnings season is now underway, and the expectation is for another strong quarter.
EMPLOYMENT	A+	The US economy added 201,000 new jobs in August and the unemployment rate remained below 4%. Additionally, weekly jobless claims fell to their lowest level in over 50 years last week. The job market remains very healthy.
INFLATION	B	Inflation is often a sign of “tightening” in the economy, and can be a signal that growth is peaking. The inflation rate remains benign at this time, but we see the potential for an increase moving forward. This metric deserves our attention.
OTHER CONCERNS
INTERNATIONAL RISKS	5	The above ratings assume no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 5. These risks deserve our ongoing attention.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

Valley National Financial Advisors, and its family of companies, has been in the Lehigh Valley since 1985. The company is independent and locally owned. As a respected and trusted organization, our relationships with many clients and their families transcend generations. We have the expertise to provide clients with financial strategies to effectively manage their existing assets and to provide for the eventual transfer of their wealth.

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