I’ve written several times over the last few years about the good news/bad news landscape that confuses and confounds U.S. investors and analysts alike. While the investing public continues to hold trillions of dollars in cash or cash equivalents, it’s no wonder Americans continue to scratch their heads as major indexes continue to hit new highs.

Here is a breakdown of good news/bad news scenario today.

The Good News:

• The estimated earnings decline for the third quarter is -2.3%. While that is still a decline, it is less than the previous estimate of -2.5%. A slight decline in corporate earnings is not the end of the world. With interest rates low and employment numbers high, we can weather this minor road bump.
• Consumers continue to spend. Two-thirds of economic activity comes from consumer spending. With retail sales up slightly in October, analysts are hoping for a successful retail season.
• Existing home sales are not strong, but this is mostly due to a lack of inventory as homeowners are staying put longer and fixing up their residences. New home building permits are up as well as housing starts. Home sales (for both new and existing homes) are a strong driver of the economy.
• Jobs. Employers continue to add to their payrolls in strong numbers. The more people work, the more they pay in taxes and the more discretionary income they have for spending.

The Bad News:

• Uncertainty over the trade dispute with China and Europe remains the biggest negative factor for the S. economy. It is responsible for the following statistics:
• $416 billion projected this year for total U.S. farm debt. That, is up 40% from 2012. Farm bankruptcies are up 24%, the highest since 2011.
• A decline of 120,000 inbound containers at two of the largest U.S. ports, Los Angeles and Long Beach in the month of October.
• $7 billion collected by the U.S. Treasury from the increase in tariffs just in the month of September. Yes, this is a negative as we bear the cost burden of tariffs, not the country exporting the goods. Companies who receive the goods in the U.S. pay the tariffs and usually pass the cost along to consumers in the form of higher prices.
• A 13% decline in exports from China to the U.S. Some of this has been made up by corporations finding alternative suppliers around the globe but it still adds to the uncertainty.
• Jobs. Yes, this is both good news and bad news. Currently, there are 1.26 million more jobs available than there are unemployed workers. Hopefully, those who have fallen off as they are no longer actively searching for work, may begin to find their way back to the job market.

The government deficit now stands at $1 trillion. Even though it is still a small percentage of total U.S. output, it still needs to be paid some day.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Consult your financial professional before making any investment decision.  You cannot invest directly in an index.  Past performance does not guarantee future results.
 
This blog was prepared by David M. Kover, CFP^® C(k)P^®

Sources:  Bloomberg, Dorsey Wright & Associates, Inc. and The Wall Street Journal, FactSet.   Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  

Securities offered through Triad Advisors, member FINRA/SIPC. Investment advice offered through Resources Investment Advisors, LLC, an SEC-registered investment adviser. Resources Investment Advisors. LLC and Vertical Financial Group are not affiliated with Triad Advisors, LLC.