Recap & Outlook: Confidence in the US
We digress from our Vancouver housing market series and turn our attention back to the global economy and financial markets. This week, we focus on impressive confidence data from the US.
- Consumer confidence is almost at record high as you can see in Figure 1 to the right. The blue line is data released from the Conference Board earlier this week. It has not been this high for 18 years. The green line is a well followed survey from the University of Michigan and it shows similar results. These two distinct data points confirm US consumer strength. As the consumer is approximately two thirds of the US economy, this is a relatively important input in economic analysis.
- We would have to go back to the dotcom bubble and the recession that followed before previous highs could be observed. While equity valuations are not as high at this point, that is quite a statement.
- Employee Confidence is also approaching dotcom levels as Figure 2 to the right shows. The US Quits Rate, which presents employees that are voluntarily leaving work (with the assumption that they have a better paying job), has also increased to levels not seen single bubble times. This would be a third independent confirming data point.
- Corporate profits would ultimately be at risk as wage growth starts to pick up from both increased confidence levels and quit ratios. The investment team is starting to see this in some of our companies where larbour is tight.
“This means that” we continue to see economic strength in the US with little indication of easing at this point. At the end of August, we wrote about growing emerging markets risks and after today’s discussion about the US we will update you on that again in next week’s issue.
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*All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund and Partners’ Real Return Plus Fund are presented based on the masters series of each fund. The Pathfinder Core: Equity Portfolio and The Pathfinder Core: High Income Portfolio are live accounts. These are actual accounts owned by the Pathfinder Chairman (Equity) and client (High Income) which contain no legacy positions, cash flows or other Pathfinder investment mandates or products. Monthly inception dates for each fund and portfolio are as follows: Pathfinder Core: Equity Portfolio (January 2011), Pathfinder Core: High Income Portfolio (October 2012) Partners’ Fund (April 2011), Partners’ Real Return Plus Fund (April, 2013), and Partners’ Core Plus Fund (November 2014).
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