Despite seeming painfully slow, the economy is actually right on track for a financial crisis recovery.
A recession is akin to having the flu, whereas a financial crisis – such as the nation had in 2008 – is similar to a major heart attack. Tim Leach, chief investment officer for U.S. Bank’s Wealth Management Group, used this medical analogy earlier today at U.S. Bank’s annual economic update at the Antlers Hilton.
Even though the flu feels awful, recovery is rather quick. Following this analogy, recovery from a financial crisis is lengthy and painful.
Nationwide, the economy – or patient – was in critical care, hooked up to multiple machines, but the federal government is pulling off most of those plugs.
Business and consumer confidence is still low, affecting hiring and capital spending.
Although taxes could increase from 35 percent to 39 percent, for the highest income brackets, there are still a “myriad” of investment strategies that bankers and investors can use, Leach said.
As for strategies, “the emerging world is on fire,” said Norman Alvis, senior portfolio manager for U.S. Bank’s Private Client Group.
“That’s where the growth is happening.”
Currently, the bank’s investment portfolios are “skewed” toward emerging markets in equities. As for its fixed income portion, it is underweight in investment grade bonds and TIPS, or Treasury Inflation-Protected Securities, and is overweight in high-yield bonds and hedged debt, Alvis said.
Also, private commercial real estate has better valuation at the moment than public REIT, or Real Estate Investment Trust securities.
There are challenges ahead for the region, said Tom Binnings, senior partner of Summit Economics. The Colorado Springs metropolitan statistical area lost 17, 000 jobs since its peak in 2008.
“The Colorado Springs economic base has been transitioning … for the entire decade,” Binnings said.
Jobs in high-tech manufacturing and information technology, two high-paying sectors, have declined, while call centers, recreation and defense sectors have increased hiring. Given layoffs and Generation Y entering the labor force, the local economy needs to add about 2,200 primary jobs per year, simply to “tread water,” he said.
However, foreclosure filings in the county are continuing to drop – a huge improvement from 1988, when the area was known as the foreclosure capital of the world.
“This time around, we’re far from that – and much better than most of the country,” Binnings said.
Although the local economy is “still in the doldrums,” job growth is expected to turn positive by the second quarter of next year.
The darkest cloud on the horizon is the election.
If Amendments 60 and 61 and Proposition 101 pass, they will have significant negative impact on the local economy, he said.