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Market Views - Economic Outlook 2018

Outlook 2018

Economy

The economy has been on a roll and our early warning tripwires for a recession are all quiet. For example, the yield curve spread*, while flattening, is still positive. Furthermore, banks are not tightening corporate lending standards and industrial production expanded in the last year. Lastly, jobless claims have not started an upward trend.

Once fully implemented, tax cuts have historically been associated with improved long-term economic growth. When compared with the prior three years, the following three year period showed sizable improvements. Working-class wage growth accelerated and the unemployment rate fell. Surprisingly, even Federal Income tax receipts showed accelerated growth.

The regulatory environment has also improved. The Federal Registry, a compilation of federal rules, has been trimmed by 32 percent or over 30,000 pages. Regulatory burdens have been recognized as a top problem for smaller businesses and this change should promote future growth.

Potential problems could include bursting market bubbles, trade wars, unexpected global conflicts and a sharp slow-down in China. In addition, U.S. government and consumer debt levels are high. A significant rise in interest rates could put a major stress on both.

After a decade of subpar economic growth, we believe the trend has turned and gains are likely in 2018.

Positives Negatives
Positive No recession tripwires triggered Negative Record federal and consumer debt
Positive James macro indicators are favorable Negative Multiple asset bubbles
Positive Tax cuts historically boost economy Negative Trade agreements in peril
Positive Regulatory environment improved Negative Optimism too high
Download The Long-term Economic Report (.PDF)   PDF


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This information is of a general nature and does not constitute financial advice. It does not take into account your individual financial situation, objectives or needs, and should not be relied upon as a substitute for financial or other professional advice to assess, among other things, whether any such information is appropriate for you and/or applicable to your particular circumstances. In addition, this does not constitute an offer to sell, or the solicitation of an offer to buy, any financial product, service or program. The information contained herein is based on public information we believe to be reliable, but its accuracy is not guaranteed.

Investing involves risks, including loss of principal.

Past performance is no guarantee of future results.

ALPS Distributors, Inc. 1290 Broadway, Ste. 1100, Denver, CO 80203 (Member FINRA). ALPS is not affiliated with James Investment Research, Inc.

*Quantitative Tightening is a course of action undertaken by the Federal Reserve to constrict spending in an economy that is seen to be growing too quickly or to curb inflation when it is rising too fast. *Yield Curve Spread is a metric bond investors use when gauging the level of expense for a bond or group of bonds. *Price-to-Sales ratio is an indicator of the value placed on each dollar of a company's sales or revenue. *Cryptocurrency is a digital or virtual currency that uses cryptography for security.

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You should carefully consider the investment objectives, potential risks, management fees, and charges and expenses of the Fund before investing. The Fund's prospectus contains this and other information about the Fund, and should be read carefully before investing. You may obtain a current copy of the Fund's prospectus by calling 1-800-995-2637 or click here to view or download a prospectus online.

Mid, Small and Micro Cap investing involve greater risk not associated with investing in more established companies, such as greater price volatility, business risk, less liquidity and increased competitive threat. Fund holdings and sector weightings are subject to change without notice. Past performance is no guarantee of future results.
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