It’s not exactly dead, but the pace of U.S. economic growth since 2009 could rightfully be called morbid.
That’s because the prime movers of economic activity – consumers – are acting like the walking dead.
Since 2009, the United States’ GDP (the total value of everything produced by all the people and companies in the country) averaged annual growth of only 1.3%.
The average annual growth rate from 1990 to 2000 was 3.3%. Compared to that, current growth (only 1.2% in the first quarter of 2017) looks like more of the same slow slog we’ve been suffering through.
What’s really killing the economy?
A Shrinking GDP, a Rising Debt… and Who to Blame
Since two-thirds of economic growth is driven by consumer spending, something must be wrong there.
In fact, there’s a lot wrong. And what’s wrong can easily, and rightfully, be blamed on politicians and their paymasters. Good old crony capitalists.
Let’s go down the list, shall we?
1) There are fewer good jobs and career opportunities at home.
That’s because a series of bad trade deals exported U.S. jobs to the benefit of giant multinational companies, who, to add insult to injury, leave their profits overseas flooding foreign economies with cheap money to spur consumer spending abroad.
2) Health care costs are out of control.
Thanks to bad politicians, who probably still haven’t read the Affordable Care Act they signed into law, a lot of money spent on healthcare would otherwise be spent elsewhere in the economy.
3) Student loan debt is fast approaching $2 trillion.
Once again, thanks to politicians pushing higher education as a means to a better future, while the Fed keeps rates low and crony capitalists make loans easy to access. Enslaving not only student borrowers but their parents and relatives as well diverts consumer spending.
Besides sky-high healthcare costs and huge student loan costs…
4) Rising house prices and rising rents are sapping consumers.
Healthcare, housing, and education costs accounted for 25% of consumer spending in 1980. Today the percentage of spending on the necessary trio is fast approaching 40%.
No wonder the economy can’t reach the speed it needs for lift-off.
The Fed pumping more than $4 trillion into the same banks that went bust from slinging subprime derivatives didn’t trickle down to American consumers, as advertised.
Sure, there are loans to be had to buy houses, if you have the right credit.
And there are consumer loans to buy almost anything, if racking up credit card charges, fees, and astronomical interest payments is your only borrowing facility.
But as cheap as interest rates are and as available as credit is, the truth is that American consumers are tapped out.
Household debt in America just topped $12.73 trillion, a new record, eclipsing the old mark of $12.68 set back at the height of the housing bubble in 2007.
Consumers need more credit to consume, but it now takes more credit to drive the same percentage of economic growth, which ultimately means more debt and less consumption.
That’s a classic negative feedback loop.
Four Sectors You Still Have a Chance to Cash in On
I’ve written here about how things got to be the way they are, and who’s to blame. And I’ll keep on pointing out who’s responsible for the widening income and wealth inequality gaps.
But pointing out crooked crony capitalist politicians isn’t enough.
Catching up, getting even, and realizing the American Dream is the only way out of this trap.
That means making money playing in the great casino called the stock market.
Right now, besides tech titans leading the market, four subsectors of the big category known as consumer discretionary stocks are right behind the big tech stock winners.
They are internet-based and direct marketing retail, restaurants, cable, and home improvement companies.
These companies all make their money from the narrowing handful of things consumers are still robustly spending their money on.
For internet-based retail, there’s no competition for Amazon.com Inc. (NASDAQ:AMZN). Yeah, its shares are flirting with the $1,000 level, but who cares? The company is all about growth, and that will continue to move its stock price up.
For restaurants, go with McDonald’s Corp. (NYSE:MCD). Sure, the company spent a little time in the wilderness thanks to an identity crisis, but it’s back and ready to continue growing (the company just announced that it’s hiring 250,000 workers this summer, a 9% increase over last year, a great sign). Another point in its favor: the 2.48% yield.
For cable providers, I like AT&T Inc. (NYSE:T), which entered the space when it purchased DirecTV in July 2015. I like the company, but I love the 5.05% yield.
And for home improvement, I like The Home Depot Inc. (NYSE:HD) and its 2.33% yield.
MCD, T, and HD all have something in common – they offer investors decent yields to hold the stocks.
Why is this important? Because if the market gets hit for any reason, you can add to your positions (averaging down and lowering your overall cost to hold the stock) while you watch your yield increase.
Go buy some of those stocks and consume some profits in the process.