Despite uncertainty about trade and signs of global
weakening, the U.S. economy remains healthy and is now in
the longest economic expansion in U.S. history. We believe
the underlying fundamentals — a robust job market, rising
wages and low inflation — support continued growth during
the rest of 2019. However, U.S. trade policy remains a
wildcard and poses a major threat to the current expansion.
U.S. business confidence has been more mixed. Surveys
that focus on larger companies have begun to show
increasing concerns about future business trends and
capital spending plans, likely in response to the trade
uncertainty between the U.S. and China. According to the
Small Business Optimism Index, confidence among “Main
Street” owners remains elevated, but has weakened from
its highs. In addition, finding quality workers is as great
concern to small business as trade turmoil, and for good
reason. The U.S. unemployment rate is the lowest in nearly
50 years at 3.6% as of June 30.
Sluggish pace of global GDP growth continues throughout 2019
Source: Ivy Investments. Chart shows 2018, 2019 forecasts of annual gross domestic product (GDP) growth, all based on purchasing power parity. Past performance is not a guarantee of future results. The GDP growth forecasts are current through July 2019, and are subject change at any time based on market and other conditions. No forecasts can be guaranteed.
Over the last three years, U.S. consumer spending has
steadily grown at 2.5–3%. While consumer confidence
readings have been mixed, they have generally been
healthy. But trade remains a key risk. If we’re wrong and
the U.S. imposes tariffs on all Chinese imports that do
not have tariffs, we will become more concerned about a
possible recession in the U.S. and globally. Unlike most of
the Chinese products that have had tariffs imposed, the
remaining imports are mostly consumer facing. Those
would have a more immediate effect on the purchasing
power of the U.S. consumer, putting an important
economic growth factor in jeopardy.
Fed survey projects decline in capital expenditure plans
(year/year % change)
Source: Ivy Investments analysis of U.S. Federal Reserve regional surveys. Data show % change year to
year of capital spending expectations and actual equipment spending.
Ivy Live: Ivy’s Midyear Outlook: Rates, risks and rallies
Past performance is not a guarantee of future results. Risk factors: Investment return and principal value will fluctuate, and it is possible to lose money by investing. International investing involves additional risks,
including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Fixed income
securities are subject to interest rate risk and, as such, the net asset value of a fixed income security may fall as interest rates rise. Investing in below investment grade securities may carry a greater risk of nonpayment
of interest or principal than higher-rated bonds. Investing in the energy sector can be riskier than other types of investment activities because of a range of factors, including price fluctuation caused by real and perceived
inflationary trends and political developments, and the cost assumed by energy companies in complying with environmental safety regulations. These and other risks are more fully described
in a Fund’s prospectus.
The S&P 500 Index is a float-adjusted market capitalization weighted index that measures the large-cap U.S. equity market. The index includes 500 of the top companies in leading industries of the U.S. economy. It is
not possible to invest
The opinions expressed are those of Ivy Investment Management Company and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current
through July 2019, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not
intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial
needs, risk tolerance and time horizon.