We're still in shutdown mode. As the latest created crisis continues, investors weigh the damage and look for opportunity.
The US is the largest economy on the planet (for now), and all eyes look to us for guidance. With the chaos in Washington, other leaders across the globe wonder if they should continue to follow our lead-- no, I meant example.
As this fight drags on, there is the very real possibility of the US sliding back into recession. According to the equation, GDP comes from 4 inputs: 1) capital investment, 2) net exports, 3) government spending, and 4) consumer spending. The biggest contributor to our economic growth is number 4. When we spend, business does well, the economy grows-- and round and round we go. Consumer spending accounts for about 2/3 of GDP.
While government spending accounts for a smaller percentage of our economy, it is a crucial part. Economists are now measuring the "dings" to GDP of this shutdown on a daily basis. Bigger than that, though, is the damage to consumer confidence.
Consumer confidence is the grease of our economic engine. When we see the mess each day on the news, we worry. We get concerned about our jobs and our personal economic situation. We pull back on spending.
The damage is easier to see than the possible opportunity. As this crisis drags on, the dollar slips. And other currencies rally. We know the largest portion of the return on international investments comes from the currency differences. The first part of the year, emerging markets dragged everything down. The dollar was strengthening then.
May be time to go all in with emerging?
Independent, Fee-Only Financial Advisor
