Redrick Terry:
4 Your Money time now. We’re joined, as always, by David Nelson, CEO of NelsonCorp Wealth Management. David, welcome back.
David Nelson:
Thanks, Redrick, appreciate it.
Redrick Terry:
Okay. So we’ve got recent headlines claiming that we’re still in the longest economic expansion in US history. What’s your take on that?
David Nelson:
It’s true. So that’s an accurate statement. There’s a lot more to it than that. I’ve got a slide here, as far as to kind of break it down. Clearly we’ve been… It’s been, from a duration perspective, we’ve got the current expansion here versus the average of the previous expansions. One important note to point out, we’ve never had a decade where we haven’t had a recession. This was the first. So it’s very unusual. So it’s 127 months, versus an average of 58 months. So that’s the good news.
David Nelson:
Now we get to some of the realism. The annual growth rate as far as the economy is 2.3 versus 4.3 being average here. So check mark, we didn’t win there. How about the labor force growth? We didn’t win there. 1% versus an average of 3%. Stock earnings growth rate, 9%, versus 12%. So couple of check marks against this.
David Nelson:
Now the good one is we’re up 14.9% from the bottom, versus 11.9%. So again, it’s not is clear as that. 10 years, we had seven years, give or take, as far as with Barack in office. Now we’ve had Trump in there. We’re loving it, to say the least. But the reality is, this has been a much weaker recovery than we’ve ever seen, as was illustrated here, as far as between the two comparisons.
Redrick Terry:
Right. So are there any unique aspects about this economic cycle, in terms of investments?
David Nelson:
There is, and it’s very dramatic, as far as, again, to have a period of time like this. The second slide that we have is going to illustrate this very well.
David Nelson:
What it’s showing, as far as… in blue is growth investments and the red is looking at value investments. Now, we see about 100% difference in return. This has been very dramatic, as far as what’s taken place. And primarily because people, in periods of time like now where there’s not a lot of growth, they’re looking for growth-y companies that will help generate some growth. The other thing, we’ve had a period of time that’s been extremely accommodative, as far as lowering interest rates, which has also helped the growth type investments compared to the value type investments.
David Nelson:
So very unique period of time. Probably never see it again in our lifetime, but for those individuals that played this right and were growth investments, they had a really, really good run here.
Redrick Terry:
Yeah, a lot of information there. So what does it all mean moving forward?
David Nelson:
So I think moving forward, history says that this will have a tendency to repeat itself. So I wouldn’t be necessarily running for the hills yet. I would be cautious, I’d be paying attention. But until we get a recession, I think this tendency is going to continue. Growth is going to beat value. When are we going to get that recession? If you knew that answer, any one of us knew that answer, we’re worth billions, and maybe even trillions, of dollars. It’s that important, as far as to get that right. So people need to be cautious, but again, don’t do anything stupid at this point in time.
Redrick Terry:
Great advice as always. David, thanks for joining us.
David Nelson:
Thank you, Redrick.
Redrick Terry:
And if you missed any part of our discussion, we’ll put it on OurQuadCities.com.