4 Economic Factors You Should Keep an Eye on!

There are 4 factors affecting the economy that you won’t want to take your eye off of – trade, the yield curve, corporate earnings growth and midterm elections. Get the details by reading on! Trump’s Trade Wars – The Trump administration has given no indication that it plans to back down from trade disputes, and it appears as though the main targets (China, the EU, Canada) are taking the same line. It feels as though we are continuously getting further away – not closer – to negotiations that may lead to resolutions. On July 6, an additional $34 billion of tariffs on Chinese goods went into effect, with China responding immediately with $34 billion of their own. That brings the total implemented tariffs to around $85 billion, which represents 2.9% of imports and 0.4% of U.S. GDP – hardly recession-worthy numbers, in our view, but growing nonetheless.1 The hundreds of billions of additional tariffs you may hear about in the news, at this stage, are only a little more than threats, investigations into business practices, or tweets. It is unclear whether these threats will become actual tariffs, and when. In our view, as more tariffs become implemented, and more time passes without resolutions or new trade arrangements, the higher the likelihood that these tariffs become permanent. This reality will create winners and losers at the sector and industry level, so the task for active managers like Zacks Investment Management is to discern which companies will be most affected. --------------------------------------------------------------- [What Happened to Consumer Spending in the U.S?]( Consumer spending is the backbone of the U.S. Economy. And while consumer spending is growing, it is not growing as fast as it used to. Now the question is, why? Knowing the causes and factors affecting consumer spending can help you get a closer look at the landscape of the U.S. Economy. If you have $500,000 or more to invest and want to learn more, click on the link below to get your free report today! [Download Our Just-Released July Market Strategy Report2 – Click Here!]( --------------------------------------------------------------- The Yield Curve and Fed Policy – The yield curve continues to flatten, as you can see in the chart below: Source: US Department of the Treasury3 Historically, an inverted yield curve has been a reliable predictor of recessions. But even after the curve inverts, there tends to be about a year and a half (17 months on average) before the economy starts to slow meaningfully or fully enter a recession. In the 1994-98 period, for instance, the curve stayed flat without inverting for an extended period, so this is not to say that a recession is just around the corner.4 The Fed’s job, in our view, continues to get trickier – the economy is expanding, inflation is slightly below normal, and the labor market is about as tight as it gets. Raising rates gradually is the obvious choice. But the Fed’s real challenge, in our view, will be to continue “normalizing” rates without moving too fast, which may be made more difficult with the trade variable now in play. The risk of policy error, in our view, is higher today than it was six months ago. Corporate Earnings Growth – on the positive side, S&P 500 earnings numbers and estimates appear – for now – to be weathering the trade battles in stride. For the S&P 500 index as a whole, total Q2 earnings are expected to be up +19% from the same period last year on +8.1% higher revenues, with 11 of the 16 Zacks sectors expected to have double-digit earnings growth. Earnings growth in the last earnings season (Q1 2018) reached its highest level in more than 7 years at +24.6% on +8.7% revenue gains. For full-year 2018, total earnings for the S&P 500 index are expected to be up +20.2% on +6.1% higher revenues. With the backdrop of robust expected earnings for the entirety of 2018, we’ve seen multiple compression across nearly every sector in the last six months – which signals, in our view, that stocks should have some wiggle room higher in the back half.5 Intensity Surrounding Midterm Elections – history suggests that we should see some volatility in the months leading up to midterm elections. From 1930 – 2014, the average S&P 500 price return in midterm election years has been as follows:6 - July: +0.5% - August: -0.4% - September: -1.2% This is not to say that it’s a given stocks will decline in the coming months. But the pattern of volatility has been pronounced in recent months, and this year is gearing up to be a fierce and perhaps ugly battle for Congressional seats, with a trade war and a Supreme Court confirmation only adding to the intrigue. Stocks do not like uncertainty, in our view, and there appears to be more of it than usual in this election cycle. Investors would be wise to expect some bumpiness, but to also keep focus on the fundamentals that should drive equity prices forward (see Corporate Earnings Growth section above). Want to learn more about the ever-changing market landscape, look no further than our Just-Released July Market Strategy Report.7 This report will give you an inside look into the backbone of the U.S. economy – consumer spending – and analyze what is causing it to slow down. If you have $500,000 or more to invest and want to learn more, click on the link below to get your free report today! --------------------------------------------------------------- ABOUT ZACKS INVESTMENT MANAGEMENT Born from Research – Built for Performance Zacks Investment Management was born out of one of the country’s largest providers of independent research, Zacks Investment Research. Our independent research capabilities from our parent company truly distinguish us from other wealth management firms - our strategies are derived from research and innovation, including the proprietary Zacks Rank stock selection model, earnings surprise and estimate revision factors. At Zacks Investment Management, we work with clients with $500,000 or more to invest, and we use this independent research, 35+ years of investment management experience, and tools we’ve developed to design customized investment portfolios based on each client’s individual needs. The end result is investment management that is research driven, results oriented and client focused. WANT TO LEARN MORE ABOUT ZACKS INVESTMENT MANAGEMENT? Here are three ways to get started: 1. Phone Us: 1-800-701-9830 2. [Go to our website at www.ZacksPCG.com]( 3. [Schedule a time to talk with]([us]( © Zacks Investment Management | [Unsubscribe]( 1 CNBC, July 5, 2018, 2 Zacks Investment Management reserves the right to amend the terms or rescind the free Market Strategy Report offer at any time and for any reason at its discretion. 3 U.S. Department of The Treasurey, July 9, 2018, 4 Strategas, July 10, 2018, 5 Zacks Investment Research, July 5, 2018, 6 Strategas, July 10, 2018, 7 Zacks Investment Management reserves the right to amend the terms or rescind the free Market Strategy Report offer at any time and for any reason at its discretion. DISCLOSURE Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. 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