Economic Review: Second Quarter 2016

Michael Conway discusses the Conway Wealth Group second-quarter economic review, along with the political trends that will continue to play a role in financial markets.


Hello everyone. We wanted to check in as we enter the second half of what has become an increasingly noteworthy year. Recent tragedies across the U.S. yet again remind us that we have room to improve as a society, and as a country, and we look forward to taking those positive steps together. Meanwhile, a palpable anger toward policy makers has fueled an incredibly divisive political climate. As the presidential election finally draws near we expect hard line stances, mud slinging, and general animosity to remain prominent features of both parties through November. On the financial front the UK recently voted to leave, or Brexit, the European Union resulting in global stock markets losing three trillion over the course of two days, as world-wide government bond yields hit unprecedented lows. Somehow amid all of this drama, Wall Street has watched as stocks reversed course, and reached all-time highs.

To some extent the recent rally reflects a series of healthy U.S. economic data. The labor market shows signs of improvement, consumer confidence is strong, and inflation-adjusted wage gains had been on the rise for quite some time. Housing has improved as mortgage rates have dropped, manufacturing is up a bit, inflation is on the rise, and dollar weakness will support exporters, manufacturers, and multi-national companies. However, we believe much of equity market strength continues to reflect unprecedented central bank manipulation. Amid global weakness, and despite near zero and even negative rates, we expect central banks to accelerate stimulus measures. After the sudden dip in markets, after Brexit for example, central banks came to the rescue and with some not-so-subtle hints of action sending equities to record highs. After calling for four increases in 2016, some analysts now believe the U.S. Federal Reserve won’t move rates higher this year at all.

So far, 2016 has proven both fascinating and frustrating, and all signs point toward a continuation of that theme. For now, we remain watchful of all global developments. Despite the issues we want to ensure our clients maintain a long term perspective to keep plans on track for future success. In the meantime, enjoy the rest of your summer, and remember: You are well positioned as we continue to help guide you towards aligning life and wealth. As always, please don’t hesitate to call us with any questions you might have.