9 reasons to be optimistic about the economy and markets 💪

Massive forces are preventing a sure-thing recession 📊

(Source: Pexels)

Most experts appear to be pretty bearish about the stock market and the economy right now, with many expecting an economic downturn to lead to deteriorating earnings, which in turn could be bad for stock prices.

This sentiment can largely be explained by the fact that inflation remains troublingly high, which suggests we’ll have a protracted period of tight monetary policy.

But economic and earnings recessions are not sure things. And there are plenty of reasons to believe that any downturn would be mild.

Below are nine reasons to be optimistic. I’m gonna start by revisiting the three massive economic tailwinds I can’t stop thinking about.

1. Demand for labor is very strong

According to BLS data released Wednesday, U.S. employers had 10.46 million job openings listed in November, down modestly from 10.51 million openings in October. While openings are below the record high of 11.85 million in March, they remain well above pre-pandemic levels.

During the period, there were 6.01 million people unemployed. That means there were 1.74 job openings per unemployed person in November. This is down from 1.99 in March, but it still suggests there are lots of opportunities out there for job seekers.

There were 1.74 job openings per unemployed person in November. (Source: BLS via FRED)

The elevated number of job openings explain everything happening in the economy right now, including why demand has been holding up and why wages have yet to cool.

Some people question whether all these job openings are legitimate. While there is certainly some merit to this concern, all the evidence suggests there are many more openings than available workers.

For more, read: “How job openings explain everything in the economy and the markets right now 📋“ and “Were there really twice as many job openings as unemployed people? 🤨.”

2. Consumer finances are very strong

Consumers are still sitting on about $1 trillion in estimated excess savings — the extra cash consumers have piled up since February 2020, thanks to a combination of government financial support and limited spending options during the pandemic.

(Source: BofA via TKer)

Excess savings are down from 2021 highs, but they still represent months of extra spending power. That’s a big deal, as personal consumption expenditures represent about 71% of GDP.

While the wealthiest consumers accumulated the bulk of these savings, BofA card data through November shows even lower-income consumers continue to sit on checking- and savings-account balances that are well above pre-pandemic levels.

For more, read: “Consumer finances are in remarkably good shape 💰.“

3. Businesses are investing at a near-record rate

Orders for nondefense capital goods excluding aircraft — a.k.a. core capex or business investment — climbed to a near-record $75.2 billion in November.

(Source: @USCensusBureau)

What exactly is this stuff? It’s all the expensive equipment your company buys so that you and your coworkers can produce the goods and services you sell.

And to be clear, these are orders, which can be canceled. This stuff hasn’t even shipped yet. If the economy were barreling toward a recession, these numbers would not be this high.

For more, read: “Why the recession we may or may not be heading for won't be that bad 💪“ and “Businesses are investing in themselves at a record rate 📈.“