RECESSION FEARS SUBSIDING
For months, many investors have feared a US recession. These concerns have begun to ease in recent weeks. Oil prices have stabilized, and US economic growth, while not robust, is holding in at 2%. Given the level of fear many have harbored in recent months, these modest signs of improvement could help rejuvenate investors' appetite for stocks.
Where might the growth in the marketplace come from? The US consumer. Boosted by a moderate increase in wages, as well as falling costs for gasoline, home heating and cooling, the US consumer simply has more money to spend. History tells us that when consumers feel confident that price declines (e.g., energy) are here to stay, they tend to spend more.
There are other signs of an economic turnaround. Container shipments and truck shipments are up. Some air freight indicators are beginning to rise. Spending in technology and telecom have begun to improve. Taken together, these developments point to a potential improvement in demand.
It looks as though the US economy won't disintegrate into recession any time soon but will more likely maintain the slow-growth pattern of the past several years. It's an environment where investors may want to consider adding to their portfolios some of the riskier assets offered in the marketplace.
(Source: MFS Strategist's Corner 3/2016)
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