We’re marking the 9th year of economic expansion since the financial crisis of 2008 and correlated market lows of early 2009. This recovery cycle may be lower than historical averages, but it has also been steady and long – already it’s the third longest expansion we’ve experienced. Have we fully caught up to where we were? Are we ok now?
In short, it looks like “yes”. There is a lot of supporting evidence to suggest we’ve recovered as much as we’re going to. Median home prices – remember housing was the spark that set off the fire of the 2008 – have jumped to its all time highest in June after 64 straight months of year-over-year price increases. Americans have gone back to work; the labor markets are tight, with low (4.4%) unemployment and millions of unfilled positions. Regular investors are being rewarded; the equity markets are experiencing rolling all time highs. Professionals are similarly encouraged; after considering this evidence, the Federal Reserve clearly thinks we’ve recovered and has set us on a path of monetary tightening following years of encouraging the economy through easy borrowing and supported bond markets.
There is a more salient question for investors: can we keep expanding? The sources for economic expansion – increased numbers of workers, productivity enhancements through capital expenditures or efficiency, increased credit, investment in positive net present value projects, and so on – remain steady although nobody can guess what policy decisions or changes in sentiment may occur to change our growth trajectory.