Investment Outlook: December 2018

US Freedom Capital
Investment Outlook
December 2018

From: David Gunderson, Chief Investment Officer

Recent US economic data continues to show impressive growth, with Retail Sales, Wholesale Trade, Manufacturing and Capital Goods all rising during the most recent month. Of interest to our investors, both Residential Construction (up 7.7% YOY) and Nonresidential Construction (up 1.9% YOY) posted gains.

In addition to a stronger-than-anticipated economy fueling more purchases, tariffs and tax cuts are increasing inflation, which is driving up the dollar-denominated value of Retail Sales. Accelerating growth will likely persist into early next year before a slowing growth trend takes hold in 2019.

This past month’s activity reaffirms our outlook for the economy as follows:

As our firm is primarily concerned with Texas real estate investments, we focus on additional factors in preparing our outlook, including in-migration and local economic performance. An excerpt from the Dallas Federal Reserve office reads: 

Dallas–Fort Worth economic growth moderated in September. Payroll employment expanded at a slower pace in the third quarter than the second. Unemployment held steady near record lows, and the Dallas and Fort Worth business-cycle indexes expanded further.

We see US real estate continuing as a superior investment for our offshore investors, as this asset class is an income producing hedge against inflation. Equally, it acts as a superior hedge against the increasing volatility of the equities markets. Texas will continue to benefit from the fallout from the 2017 Tax Act, as companies in high tax states are faced with significantly higher local taxes in 2018 and beyond and many make the choice to relocate to states with low or zero state income taxes.

We are also watching with interest:
• PIMCO’s expectation of greater financial market volatility (http://bit.ly/pico-vol)
• The Dallas Federal Reserve Bank’s economic report (http://bit.ly/dal-fed)
• Fortune’s predictions for 2019 (http://bit.ly/2019predicts)
• Remembering President George H.W. Bush (http://bit.ly/ghwbush)

Until next month, our best wishes for your health and prosperity.

Best regards,
David E. Gunderson
Chief Investment Officer
US Freedom Capital