America’s perfectly slow economy?

The Trump economy continues to mirror the Obama economy: Slow and steady. But that might not be bad news. But before I bring you the silver lining, here’s the problem: Since 2010, which is after we started to recover from the financial crisis, our GDP has only averaged 2% growth. If you compare that to our historical average of 3%, you can see what the concern is.  

So, what’s holding us back? Many argue we’re still suffering a hangover from the financial crisis. Others will point to over regulation, or the effects of inequality, or globalization, or the weak global economy… There are many angles, I think there’s some truth in all those ideas. 

However, here’s an idea I haven’t heard many people talk about: Over the last 20 years, our GDP has grown from $11 trillion to more than $16 trillion. If you go back 40 years, our economy has nearly tripled in size. So, the world has never seen an economy this big, which means economists have never studied an economy this big. Who cares if our economy averaged 3% growth over the last 100 years? This economy is a completely different beast.  

There’s a reason gymnasts are usually tiny. It’s easier to move quickly, change directions, and be explosive when you’re small and nimble. However, this American economy is no gymnast. Today’s American economy is much more comparable to Shaquille O’Neal – and while Shaq was a great athlete, there’s no way he could be as explosive as your average gymnast. But that’s not all bad, because Shaq was powerful, and once he really got moving, not much was going to slow him down.  

That might be where our economy is right now. Wars haven’t slowed us down, scary global economic issues in Europe, Japan, and China, haven’t slowed us down. Political drama and incompetence here in America hasn’t slowed us down… Our Shaquille O’Neal economy continues to shrug all that stuff off. 

So, perhaps our economy isn’t capable of explosively sprinting anymore, but that may not be a terrible place to be. It might be that consistent 2% growth is perfect for a big, strong, mature economy like ours. The problem for investors is that the stock market seems to be anticipating something better than that. Because of that, I worry that the stock market could be disappointed at some point in the future, which won’t be a fun ride for investors. However, if our economy is big and strong and powerful, and really hard to slow down, that could be a very good thing for investors over the long-term.

Brad Blackburn, CFP®, is the owner of Blackburn Financial, Registered Investment Advisor. Blackburn Financial is located at 121 Cottage Ave, Cashmere. He can be reached at 509-782-2600 or email him at brad@blackburnfinancial.net