Instead of getting caught up in the fearful narrative that\nsurrounds current volatility, why not look at how to posture your portfolios\nfor a late cycle, mature bull market? In my opinion, that means shifting your\nportfolio management mindset to focus on quality.<\/p>\n\n\n\n
Where should you look to find this quality? Our\njust-released Stock Market Outlook report can help you keep an eye on key\neconomic indicators to help you focus on quality and base your investments on\nhard data.<\/p>\n\n\n\n
This 22-page report contains some of our key forecasts to\nconsider such as:<\/p>\n\n\n\n
- Forecast\nfor the S&P<\/em><\/li>
- Small-cap\nand large-cap outlook <\/em><\/li>
- Which\nsectors are hot and which are not?<\/em><\/li>
- What\nindustries within those sectors most merit your attention?<\/em><\/li>
- Odds of\nrecession<\/em><\/li>
- And much\nmore.<\/em><\/li><\/ul>\n\n\n\n
If you\nhave $500,000 or more to invest and want to learn more about these forecasts,\nclick on the link below to get your free report today! <\/p>\n\n\n\n
IT’S FREE. Download the Just-Released November 2019 Stock Market Outlook<\/a>1<\/a><\/sup> >><\/a><\/strong><\/p>\n\n\n\n
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Manufacturing versus The\nU.S. Consumer, Labor Markets, and Services<\/strong><\/p>\n\n\n\n
Manufacturing is an important component of the U.S. economy and\nhas historically been a leading indicator. But news last week made it appear as\nthough factory activity is a bellwether for the U.S. economy. It isn\u2019t. The manufacturing\nsector only accounts for around 10% of the U.S. economy, and that number has\nbeen shrinking progressively over the years.2<\/sup> <\/p>\n\n\n\n
I believe this shrinking trend does not signal any kind of economic\ndownfall and should not be viewed in a negative light \u2013 it is simply part of a\nlonger-term transition, where the U.S. has moved from being an industrial\neconomy to now being a services and consumption-based economy. In the modern\neconomy, skilled labor has more value and pays higher wages than unskilled\nlabor, which has led to overall increases in wealth over time (though creating\nwinners and losers in the process). <\/p>\n\n\n\n
Services Account for\na Growing Share of the U.S. Economy<\/strong><\/p>\n\n\n\n
![\"\"](\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/2_image-1-of-1.png\")
<\/figure>\n\n\n\nSource:\nCredit Suisse3<\/sup><\/strong><\/strong><\/p>\n\n\n\n
To be fair, if the ISM services\ndata last week had indicated contracting activity in the U.S. economy, my tone\nhere might be a bit different. But the ISM Non-Manufacturing PMI, which\nmeasures services in the U.S. economy, remained comfortably in expansion\nterritory and relatively healthy. Many news reports noted that services data\nwas less expansionary than expected, and that it surprised to the downside, but\nat the end of the day growth is growth.4<\/sup><\/p>\n\n\n\n
Macroeconomic data in the labor market and retail sales (the\nall-important U.S. consumer) also offer evidence that it is not all\ndoom-and-gloom in the U.S. economy. Job growth as measured by non-farm payrolls\nremains strong, with reports last week showing that the U.S. added 136,000 jobs\nin September, bringing the jobless rate (3.5%) to its lowest level in 50 years.5<\/sup>\n<\/p>\n\n\n\n
Small businesses, which are often considered a key growth\nengine for the U.S. economy, have been increasingly reporting labor shortages, <\/em>where 57% of owners have said\nthey\u2019re hiring or trying to hire new workers. A majority of these business\nowners have reported finding few, if any, qualified applicants for open\npositions, which might at once point to strength in economic activity but also\na skilled labor shortage in the U.S. A key takeaway from the NFIB Small Business\nJobs Report was that \u201chiring has slowed down, but it\u2019s due to the inability to\nfind qualified workers, not because of a lack of customers.\u201d6<\/sup><\/p>\n\n\n\n
The U.S. consumer is another proxy for the health of the\nU.S. economy, and signs for now point to solid spending as we enter the holiday\nshopping season. Total retail sales for the June 2019\nthrough August 2019 period were up 3.7% from the same period a year ago, with a\nparticularly strong showing in July. In the latest ISM Non-Manufacturing\nreport, the statement from the Retail Trade sector was that \u201cbusiness continues to pick up as we\nquickly approach Q4. Week by week, we inch closer to a much-anticipated holiday\nretail season, which requires not only last-minute buys, but a push to fill\nopen positions.\u201d7<\/sup> Again, not all doom-and-gloom.<\/p>\n\n\n\n
Bottom Line for Investors <\/strong><\/p>\n\n\n\n
Recession\nrisks are clearly rising, and growth across the global economy is slowing. U.S.\ncorporate earnings are also expected to post their third straight quarter of\nnegative growth in Q3, which hasn\u2019t happened since 2015 \u2013 2016. Investors\nshould expect any bit of bad news to invoke a volatile response in the stock\nmarket. <\/p>\n\n\n\n
But it\u2019s not\nall doom-and-gloom out there, and the base case is that the U.S. economy is\nstill growing. The all-important services sector remains in expansionary\nterritory, the U.S. consumer is still spending at a nice clip, the jobs market\nis quite healthy, and interest rates are falling. Recessions do not tend to\nhappen when these factors are all working in the positive, and I do not think\nthat changes now. <\/p>\n\n\n\n
- Small-cap\nand large-cap outlook <\/em><\/li>