by John Zeray
April 2017

Introduction

Investors deciding to hold a portfolio of US stocks and bonds, perhaps within an employer-sponsored 401k plan, require an approach to the investment process. The top-down approach to investing begins with an analysis and forecast of the economy and stock market, followed by an industry analysis, and then company analysis. Macro-economic factors, the business cycle, industry life-cycles, and the competitive environment all have an impact on how industries, and firms within industries, perform. A study of industry sectors shows they cycle through peaks and troughs of the larger economy. For example, Reilly and Brown explain how financial stocks excel as the economy approaches a trough, consumer durables excel in the trough, and basic industries perform best at the cycle peak.[1] This paper assesses the current US economy and stock market as of Fall 2016, and their anticipated future performance as context for investor decisions.

Economic Analysis

At $18.65 trillion,[2] the US economy is the world’s largest and represents about 20% of global output, exporting $1.5 trillion in goods in 2015.[3] “The economy is dominated by services-oriented companies in areas such as technology, financial services, healthcare and retail”[4]; services account for 80% of output. We are the second-largest manufacturing nation in the world with manufacturing representing about 15% of domestic economic output, while agriculture now comprises less than 2% of US output.[5]

Our economy has shown improving growth in recent years, recovering gradually from the Great Recession of 2007-2009. Real Gross Domestic Product (GDP) has increased over 10% from the previous trough six years ago.[6] Per capita GDP has grown from $49,725 in 2011 to $55,868 in 2015.[7] Exhibit A shows several key measures of the US economy over the last five years. Unemployment has decreased from 8.9% in 2011[8] to 4.87% according to the most recent Household Survey data.[9] The Dow Jones Industrial Average (DJIA) has increased from 11,232 in 2012 to over 19,800 recently, recovering nicely from February 2016’s low of 15,660.[10] Bureau of Economic Analysis (BEA) data shows Real Personal Consumption Expenditures have increased about 10% from the previous peak seven years ago, while Real Exports of Goods and Services have increased by over 20% from the previous peak in 2009.[11] Inflation in the economy has decreased from 3.1% in 2011 to about 1% this year.[12]

The Federal Reserve raised its key Fed Funds rate to 0.75% at their December 14th meeting.[13] It had been at 0.5%, (see Exhibits B and C) and had previously been raised in December of 2015, the first increase since the Great Recession.[14] The change is due to the Fed’s goal of managing the money supply in the economy via monetary policy to keep inflation and employment at target levels. The improved job market may lead to inflation, and the Fed is watching both. While the economy has added about 200,000 jobs per month this year[15], that number is considered modest and less than what many would wish for in a more robust recovery. The November 4th release of Bureau of Labor Statistics (BLS) employment numbers shows an increase of 161,000 jobs in September. “Since the trough of the great recession, dated June of 2009 by the NBER [National Bureau of Economic Research], employment growth has been steady . . . yet below all other expansions except for the 2001.”[16]

While most economic measures show a broad and gradual domestic recovery has been underway for many years now, there are other indicators that may be of concern. Kiplinger, publisher of business forecasts and financial advice since 1920, anticipates the annual GDP growth rate in 2016 at 1.5% – somewhat lower than the 2.6% rate last year.[17] Business Corporate Net Worth is recovering from 2011’s floor, at which time it had declined 30% from the previous peak in 2009; it is now less than 10% down from the 2009 peak,[18] but still has not reached pre-recession levels. Publicly Held Federal Debt as a Percentage of GDP has increased over 100% from the previous peak in 2009.[19] The recent Brexit decision by British voters, unsteadiness in the European markets, and slowing growth in China may also pose concerns for some sectors of the domestic economy. Another potential concern is the surprise outcome of the recent presidential election that was decided on November 8th, 2016.

Economic Forecast

What lies ahead for the economy? Bill Conerly, contributor to Forbes, expects a mild rebound in 2017-2018. He writes, “2016 suffered from the short-term impact of reduced petroleum drilling more than the long-term benefit of cheaper gasoline,” adding, “the US Economy will enjoy a mild cyclical rebound in 2017, then return to a lower growth rate more in line with long-term potential.”[20] Brian Schaitkin, Senior Economist for The Conference Board, says that “While this is the first quarter [Q3] in a year where the economy grew faster than a 2.0 percent annual rate, underlying trends in consumption and investment indicate that the economy is unlikely to exceed a 2.0 percent trend growth in the near term.”[21] The Conference Board’s October Economic Forecast for the US economy shows it to “remain on a moderate growth path with tight labor market conditions.” Schaitkin adds, “overall rising labor costs without offsetting pricing power is slowly putting a squeeze on profits and slowing the trend of hiring.”[22] The Conference Board’s October 2016 GDP and Consumer Spending data and projections (percent change, seasonally adjusted annual rates) are summarized in the table below:

Period → 2016 Q2 2016 Q3 2016 Q4 2017 Q1
Real GDP 1.4 2.4 2.11 1.9
Real Consumer Spending 4.3 2.7 2.2 2.2
Period  2017 Q2 2015 Annual 2016 Annual 2017 Annual
Real GDP 1.7 2.6 1.5 1.9
Real Consumer Spending 2017 Q2 2015 Annual 2016 Annual 2017 Annual

Table 1. Real GDP and Consumer Spending: Current, and Q3 2016 – 2017 forecast.

The Leading Economic Index (LEI) increased in September, resting at about a 2.3 percent annual rate.[23] “With strengths among the leading indicators remaining slightly more widespread than the weaknesses. . . . Taken together, the improved performance of both the LEI and CEI [Coincident Economic Index] suggests that the expansion in economic activity will continue at a moderate pace into early 2017.”[24] Among the largest contributors to the LEI’s increase were building permits and manufacturers’ new orders for consumer goods and materials.[25]

Longer term forecasts are somewhat more tenuous. However, Kimberly Amadeo, president of World Money Watch, says about the US manufacturing outlook that it “. . . is forecast to increase faster than the general economy. US production will grow 2.6% in 2016, 3.0% in 2017, and 2.8% in 2018. Growth will slow to 2.6% in 2019 and to 2.0% in 2020.”[26] Her expectations for the unemployment rate are that it will drop to 4.6% in 2017, and to 4.5% in 2018. For inflation, Amadeo expects 1.3% in 2016, 1.9% in 2017, and 2.0% in 2018. The website, Trading Economics, forecasts future interest rates as shown below,[27] and expects the Federal Funds rates to increase by 1.5% from 2016 to 2020. See Exhibit D for M0, M1 and M2 money supply forecasts, and other monetary metrics.

Period Current Actual Q4/ 2016 Q1 2017
Interest Rate 0.5 0.75 0.75
Period Q2 2017 Q3 2017 2020
Interest Rate 0.75 0.75 2.25

Table 2. Federal Funds rate: Current (November 2016), and Q4 2016 – 2020 forecast

 The Financial Times reported in June that the possible UK exit from the European Union may have kept the Fed from raising rates, and could produce a ripple in the US economy. They quote Fed Chair, Janet Yellen, saying that Brexit “. . . was one of the uncertainties we discussed . . . and that it would be a factor in deciding on the appropriate path for policy.”[28] The Financial Times reported Fed projections of GDP growth in a tight range around 2% from 2016 into mid-2019. The graph below shows the Fed’s projected GDP bandwidth, with the darker shading indicating central tendencies for Fed projections, and the lighter shading showing the slightly broader range for future GDP projections (+/- 0.5%). The same article expects U.S. unemployment to range around 4.5% but to stay below 5% beyond 2018.

Graph. Source: Federal Reserve, Eric Platt/FT

Figure 1. Federal Reserve’s GDP Projections

The Conference Board projects global economic growth rate at 2.6% in 2017, somewhat stronger than the 2.2% forecasted for 2016.[29] The International Monetary Fund (IMF) projects a global growth rate of 3.4% for 2017, an increase from their 3.1% rate for 2016.[30] They expect global monetary policy to remain “accommodative”, with the chugging US economy and potential Brexit putting downward pressure on global interest rates. In summary, the US and global economy project steady, but not spectacular, growth ahead.

Stock Market Forecast

Stock market forecasts for 2017 and beyond range from expectations of an upcoming crash to continued opportunities for growth. What’s driving the variability in expectations? Some expectations can be sorted out into pre-election and post-election predictions. Dow Jones Futures plunged by over 800 points on election night, but then the market added more than 400 points the next day, trading at highs above 18,600. The following day it traded at above 18,800.[31] Corporate earnings, stock dividends, and interest rates had not fundamentally changed; the market was clearly just trading on emotion and expectations. During the past 12 months the DJIA has ranged from a low of 15,451 to a high of 19,974,[32] a disconcertingly wide range. Schwab’s November 11th Market Perspective states “There is much uncertainty ahead, and we expect bouts of volatility.”[33]

John Lombardi, an editor at Lombardi Financial, writes in a September 2016 article for Profit Confidential: “It’s quite possible that Warren Buffett, John Paulson, and George Soros also think U.S. stocks are in a bubble. And why not? Stocks have a price-to-earnings ratio of 25.67. Over the last 10 years, that average has been 15. Stocks are currently priced 71% higher than their 10-year average.”[34] He states that Berkshire Hathaway “has been dumping its exposure to American stocks that rely on consumer spending,”[35] and provides examples of large sell offs in recent years by Buffett’s company of Johnson & Johnson, Kraft Foods and Proctor and Gamble stocks. He cites similar sell-offs by Paulson and Soros. Lombardi offers that while the economy may look good on paper:

the underemployment rate is still at an unacceptable 14.6%, wages are stagnant, personal debt levels are high and one in seven Americans are on food stamps. Plus, more than half of Americans are still living paycheck to paycheck. For the world’s largest economy, these are not the makings of an economic recovery, nor are they the foundation for sustainable economic growth, especially when you consider the fact that the U.S. gets more than 70% of its gross domestic product from consumer spending.[36]

Lombardi’s key argument for why a crash may be in the offing is that the quantitative easing that the Fed began in 2008 led investors to the markets as the only avenue for making money. Now that rates expectations are headed upwards, the market may correct as stocks “are going to have to rely on real revenues and earnings to propel them higher.”[37] Given that GDP has grown at low rates of around 2% since 2013, the news for the future of the market may not be so good. This type of “firm foundations” analysis may hold up better than the “castles in the air” philosophy[38] for 2017. Given the predictions of future volatility, it’s possible that a correction, or at best some market rattling, will occur in 2017 although timing and duration are uncertain.

John Tobey, contributor to Forbes, has a different view. “Faltering growth (and specter of reversal) was the concern of late 2015 and early 2016. The subsequent rising trend and this summer’s new high foundation building could be setting the stage for earnings and stock price gains in 2017. Dismiss the concerns of forecast earnings uncertainty and too-high stock market valuation. Fundamentals (economic and financial) continue to improve and reasoned Wall Street outlooks indicate growth ahead.”[39] Earlier this year, Bankrate.com reported “the bull market in stocks, which began in March 2009, should persist at least another year.”[40] The S&P Election Year Seasonal Chart (see Exhibit E), and the S&P Post-Election Year Seasonal Chart,[41] below, are based on a 59-year range ending in 2009, and may have some information for us. The Election Year chart shows a 6% gain for the S&P 500, while the Post-Election Year chart, below, shows only a 4% gain for the year following an election.

Graph from EquityClock.com

Figure 2. S&P 500 Post-Election Year Seasonality

The S&P 500 had closed at 2,087 in December 2015; it closed this year at 2,238,[42] or just 36 points higher than projected based on historic trends. The Dow opened at 17,149 in January 2016. If we can use the historic S&P Election Year chart as a proxy for the DJIA (they usually trend together), a 6% increase would have indicated a market close at 18,178 at year-end. Similarly, using 4% anticipated gains for next year, we would expect the DJIA to close at 18,905, and the S&P 500 to close at 2,300 in 2017. Again, these projections are based on historic trends.

GDP Forecasts for Year-End 2016

The Bureau of Economic Analysis (BEA) releases current and real GDP numbers monthly, revising numbers each month for previous periods. Real GDP is simply current GDP adjusted for inflation in the economy, using a base year of 2009. The BEA released their advance estimate[43] for third quarter (Q3) of 2016 on October 28, 2016. Their second estimate for Q3 was released on November 29, 2016 and third estimate for Q3 GDP was to be released in late December. The table below summarizes BEA data for Current and Real GDP, and their respective annual growth rates, through third quarter (Q3) 2016.

 

Period → 2015 Annual 2016 Q1 2016 Q2 2016 Q3 2016 Q4 (forecast) 2016 Annual (forecast)
Current GDP 18,036.6 18,281.6 18,450.1 18,651.2 18,595.7 18,601.2
Current GDP Growth Rate 3.7% 1.3 3.7 4.4 * (calculated) 3.1 3.13
Real GDP 16,397.2 16,525.0 16,583.1 16,702.1 16,676 16,676
Real GDP Growth Rate 2.6% 0.8 1.4

 

2.9

 

1.7 1.7

Table 3. Current and Real GDP: Current and Forecasted

By my calculation, Current GDP Growth Rate for Q3 2016 is 4.4%. See Exhibit F for calculations and definitions. Forecasts for fourth quarter 2016 and annual 2016 are shown in the final two columns. Growth rate forecasts for 2016 are lower than 2015’s actual growth rates, with Current GDP growth at 3.1% and Real GDP growth dipping to 1.7%. Methodology for forecasting numbers and growth rates are discussed next.

The BEA methodology for annualization of growth rate, r, is:[44]

r=[(GDPt/GDP0)m/n – 1] x 100           (1)

The formula assumes GDP in the current period (GDPt) and the previous period (GDP0) are known. Because fourth quarter GDP is unknown at this writing, the forecast for fourth quarter 2016 and annual 2016 GDP numbers are future estimates based on the arithmetic average growth rate of the previous three periods. For example, GDP growth for Q4 2016 is calculated:

Q4 = (Q1+Q2+Q3)/3                              (2)

The Q4 2016 Current GDP is arrived at by multiplying the 2015 Current GDP (18,036.6 billion) by the computed Q4 Current GDP Growth Rate (3.1%). Similar methodology is used for computing Q4 2016 and annual 2016 Real GDP and Real GDP Growth rates. The forecasted 1.7 % rate of Real GDP growth for this year is pulled up by third quarter Real GDP growth of 2.9%. While less than the previous year’s 2.6% growth rate, it indicates continued steady economic growth. BEA’s final fourth quarter and annual GDP numbers for 2016 will not be available until March 2017.

The Dow Jones Industrial Average (DJIA) Index Forecast

Reilly and Brown, in their book, Investment Analysis and Portfolio Management, offer several approaches for forecasting stock market growth. The Dividend Discount Model (DDM), used to forecast individual firms’ stock prices, can also be used for stock index forecasting.[45] The DDM forecasts market value, VJ, defined as equal to the stock index price, PJ, and is calculated as follows:

VJ=Pj=D1/(k-g).                                       (3)

This involves first calculating D1, dividend, based on D0 (1+g), where D0 is the average stock index dividend for the previous year, and g is the expected growth rate of the economy. Reilly and Brown use the trailing 52-week dividend estimate in Barron’s. The other main method for arriving at stock market valuation uses the Free Cash Flow to Equity (FCFE) model. Yet other methods include Price-to-earnings ratio(P/E), Price-to-book value ratio (P/BV), Price-to-cash-flow ratio (P/CF), and Price-to-sales ratio (P/S). The DDM, FCFE, and other methods are relatively complex and would require a separate detailed discussion. The table below shows year-end closing values for the DJIA index for 2014 and 2015. The next column shows the actual market close for Friday, December 30, 2016.[46] The final column shows the projected close for the end of this year based on historic data embedded in the S&P Election Year chart discussed previously.

Period → 2014

December 31

2015

December 31

2016

December 30 (actual)

2016 December 31 (forecasted)
DJIA 18,054 17,425 19,762 18,200

Table 4. Dow Jones Industrial Average: Current and Forecasted

Given the Dow’s actual year-end close at 19,762 and the over 1,500-point variance from the forecasted close of 18,200, it would certainly seem stocks are considerably overvalued today. It would be fair to say that based on this brief analysis and historic trends, the scenario for a market correction is more realistic than continuing expectations for unabated market growth ahead. Informed investors may want to frame their expectations accordingly.

Exhibit A

United States Economy Data[47]

2011 2012 2013 2014 2015
Population (million) 312 314 317 319 321
GDP per capita (USD) 49,725 51,384 52,608 54,375 55,868
GDP (USD bn) 15,518 16,155 16,663 17,348 17,947
Economic Growth (GDP, annual variation in %) 1.6 2.2 1.5 2.4 2.4
Domestic Demand (annual variation in %) 1.6 2.1 1.3 2.5 3.0
Consumption (annual variation in %) 2.3 1.5 1.7 2.7 3.1
Investment (annual variation in %) 6.4 9.8 4.2 5.3 4.0
Exports (G&S, annual variation in %) 6.9 3.4 2.8 3.4 1.1
Imports (G&S, annual variation in %) 5.5 2.2 1.1 3.8 4.9
Industrial Production (annual variation in %) 2.9 2.8 1.9 2.9 0.3
Retail Sales (annual variation in %) 7.3 5.0 3.7 3.9 2.2
Unemployment Rate 8.9 8.1 7.4 6.2 5.3
Fiscal Balance (% of GDP) -8.4 -6.7 -4.1 -2.8 -2.4
Public Debt (% of GDP) 98.3 102 104 105 106
Money (annual variation in %) 7.4 8.6 6.8 6.2 5.9
Inflation Rate (CPI, annual variation in %, eop) 3.1 1.8 1.5 0.7 0.7
Inflation Rate (CPI, annual variation in %) 3.1 2.1 1.5 1.6 0.1
Inflation (PPI, annual variation in %) 3.9 1.8 1.4 1.6 -0.9
Policy Interest Rate (%) 0.25 0.25 0.25 0.25 0.50
Stock Market (annual variation in %) 5.5 7.3 26.5 7.5 -2.2
Current Account (% of GDP) -3.0 -2.8 -2.3 -2.2 -2.7
Current Account Balance (USD bn) -460.4 -449.7 -376.8 -389.5 -484.1
Trade Balance (USD billion) -740.7 -741.2 -702.6 -741.5 -759.3

Exhibit B

Daily Treasury Yield Curve[48]

Date 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr
11/01/16 0.24 0.35 0.50 0.65 0.83 0.99 1.30 1.61 1.83 2.24 2.58
11/02/16 0.24 0.37 0.51 0.64 0.81 0.98 1.26 1.57 1.81 2.22 2.56
11/03/16 0.24 0.38 0.52 0.64 0.81 0.98 1.26 1.58 1.82 2.25 2.60
11/04/16 0.25 0.38 0.52 0.62 0.80 0.95 1.24 1.55 1.79 2.22 2.56
11/07/16 0.28 0.41 0.54 0.63 0.82 0.99 1.29 1.60 1.83 2.26 2.60
11/08/16 0.28 0.43 0.56 0.71 0.87 1.04 1.34 1.65 1.88 2.29 2.63
11/09/16 0.30 0.45 0.56 0.72 0.90 1.12 1.49 1.84 2.07 2.52 2.88
11/10/16 0.30 0.48 0.59 0.72 0.92 1.17 1.56 1.92 2.15 2.58 2.94

Exhibit C

Tables – current and historic American central bank interest rates[49]

US FED latest interest rate changes

 change date percentage
 December 16 2015 0.500 %
 December 16 2008 0.250 %
 October 29 2008 1.000 %
 October 08 2008 1.500 %
 April 30 2008 2.000 %
 March 18 2008 2.250 %
 January 30 2008 3.000 %
 January 22 2008 3.500 %
 December 11 2007 4.250 %
 October 31 2007 4.500 %

Summary of other central banks’ interest rates

 central bank interest rate region percentage date
 FED interest rate United States 0.500 % 12-16-2015
 RBA interest rate Australia 1.500 % 08-02-2016
 BACEN interest rate Brazil 14.000 % 10-19-2016
 BoE interest rate Great Britain 0.250 % 08-04-2016
 BOC interest rate Canada 0.500 % 07-15-2015
 PBC interest rate China 4.350 % 10-23-2015
 ECB interest rate Europe 0.000 % 03-10-2016
 BoJ interest rate Japan 0.000 % 02-01-2016
 CBR interest rate Russia 10.000 % 09-16-2016
 SARB interest rate South Africa 7.000 % 03-17-2016

Exhibit D

Interest Rate Forecast[50]

United States Money Last Q4/16 Q1/17 Q2/17 Q3/17 2020
Interest Rate 0.5 0.75 0.75 0.75 0.75 2.25
Interbank Rate 0.88 0.91 0.96 0.96 1 2.5
Money Supply M0 3735753 3945828 4044574 4144915 4246928 5758726
Money Supply M1 3318 3373 3423 3460 3487 3544
Money Supply M2 13071 13284 13484 13661 13819 14770
Foreign Exchange Reserves 122431 122586 122051 121472 120895 114011
Central Bank Balance Sheet 4430040 4422105 4403748 4380187 4354390 4064024
Banks Balance Sheet 15924600 15905510 15905657 15903158 15900576 15866833
Loans to Private Sector 2077 2098 2117 2131 2141 2104
Private Debt to GDP 198 198 198 198 197 194
Foreign Bond Investment -24784 -15004 -11109 -7530 -4768 9295

Exhibit E

Election Year Seasonal Chart[51]

Graph of S&P 500 Electio Year Seasonality, from EquityClock.com

 Exhibit F

 Bureau of Economic Analysis GDP numbers are used for second quarter (Q2) and third quarter (Q3) of 2016.

The BEA methodology[52] for annualization of growth is: r=[(GDPt/GDP0)m/n – 1] x 100.

My Calculation:

r = ((18651.2/18450.1)^(4/1)-1))*100

r, nominal GDP growth rate, is calculated at 4.43% for Q3 of 2016.
Data:
Q3 GDPt $18,651.2 billion
Q2 GDP0 $18,450.1 billion
m 4 (quarters)
n 1 (period)
Result: r 4.43 percent

 

Terms:
GDPt the level of activity in the later period
GDP0 the level of activity in the earlier period
m = periodicity of the data (1 for annual, 4 for quarterly, 12 for monthly)
n= the number of periods between the earlier period and the later period
r= nominal GDP Growth rate

Notes

[1] Frank Reilly and Keith Brown, Analysis of Investments & Management of Portfolios (Amherst: South-Western, Cengage Learning, 2012), p. 400.

[2] Lisa Mataloni, “National Income and Product Account -Gross Domestic Product: Third Quarter 2016”, Bureau of Economic Analysis, News Release BEA 16-57, accessed November 5, 2016, https://www.bea.gov/newsreleases/ national/gdp/2016/pdf/gdp3q16_adv.pdf.

[3] US Economic Outlook, FocusEconomics, accessed November 5, 2016, http://www.focus-economics.com/countries/united-states.

[4] Ibid.

[5] Ibid.

[6] Thomas Cooley, Ben Griffey, and Peter Rupert, “GDP Report Shows Modest Gains”, US Economic Snapshot (blog), September 29,2016, accessed October 28, 2016, www.econsnapshot.com/page/3/.

[7] US Economic Outlook, FocusEconomics, accessed November 5, 2016, http://www.focus-economics.com/countries/united-states.

[8] Ibid.

[9] Thomas Cooley, Ben Griffey, and Peter Rupert, “September Employment Report Card: Modest”, US Economic Snapshot (blog), October 7, 2016, accessed October 28, 2016, www.econsnapshot.com/page/3/.

[10] DJIA, Interactive Charts, 5-year and 1-year charts, MarketWatch, accessed December 30, 2016 http://www.marketwatch.com/investing/index/djia/charts?chartType=interactive&countryCode=US.

[11] Thomas Cooley, Ben Griffey, and Peter Rupert, “Q3 GDP Grows at an Improved Pace”, US Economic Snapshot (blog), October 30, 2016, accessed November 5, 2016, www.econsnapshot.com/page/3/.

[12] US Economic Outlook, FocusEconomics, accessed November 5, 2016, http://www.focus-economics.com/countries/united-states.

[13] Ylan Q. Mui, “Federal Reserve Hints at December Interest Rate Increase.” Washington Post, November 2, 2016, accessed November 2, 2016, https://www.washingtonpost.com/news/wonk/wp/2016/11/02/.

[14] Fed Federal Funds Rate, American central banks interest rate, Global Rates.com, accessed November 7, 2016, http://www.global-rates.com/interest-rates/central-banks/central-bank-america/fed-interest-rate.aspx.

[15] Thomas Cooley, Ben Griffey, and Peter Rupert, “GDP Report Shows Modest Gains”, US Economic Snapshot (blog), September 29,2016, accessed October 28, 2016, www.econsnapshot.com/page/3/.

[16] Thomas Cooley, Ben Griffey, and Peter Rupert, “October Employment . . . Strong Enough?”, US Economic Snapshot (blog), November 4, 2016, accessed November 5, 2016, www.econsnapshot.com/p3/.

[17] David Payne, “Economy is Muddling Along”, Kiplinger, October 31,2016, accessed November 6, 2016, http://www.kiplinger.com/article/business/T019-C000-S010-gdp-growth-rate-and-forecast.html.

[18] Thomas Cooley, Ben Griffey, and Peter Rupert, “Stagnant Growth Continues”, US Economic Snapshot (blog), July 29, 2016, accessed October 28, 2016, www.econsnapshot.com/page/3/.

[19] Ibid.

[20] Bill Connerly, “US Economic Forecast 2017-2018: Mild Rebound”, Forbes, September 16, 2016, accessed October 22, 2016, http://www/forbes.com/sites/billconerly/ 2016/09/16/u-s-economic-forecast-2017-2018-mild-rebound#5f92587c5337.

[21] “Comment on Q3 GDP by Brian Schaitkin, Senior Economist, The Conference Board”, Press Release, The Conference Board, October 28, 2016, accessed November 6, 2016, https://www.conference-board.org/press/ pressdetail.cfm?pressid=6885.

[22] “The Conference Board Economic Forecast for the US Economy”, The Conference Board, October 12, 2016; accessed November 6, 2016, https://www.conference-board.org/pdf_free/economics/2016_10_12.pdf.

[23] “The Conference Board Leading Economic Index (LEI) for the US Increased in October”, The Conference Board, October 20,2016, accessed November 6, 2016, https://www.conference-board.org/data/bciarchive .cfm?cid=1&pid=6878.

[24] “The Conference Board Leading Economic Index (LEI) for the US Increased in October”, The Conference Board, October 20,2016, accessed November 6, 2016, https://www.conference-board.org/data/bciarchive. cfm?cid=1&pid=6878.

[25] Ibid.

[26] Kimberly Amadeo, “US Economic Outlook: For 2016 and Beyond”, The Balance, September 27, 2016, accessed November 6, 2016, https://www.thebalance.com/us-economic-outlook-3305669.

[27] United States Fed Funds Rate, Trading Economics, accessed November 7, 2016, http://www.tradingeconomics.com/ united-states/interest-rate/forecast.

[28] “Fed Pares Back 2017 Interest Rate Forecasts”, Financial Times, June 15, 2016, accessed November 7, 2016, https://www.ft.com/content/99ac1df2-3320-11e6-ad39-3fee5ffe5b5b.

[29] “Global Economic Outlook 2016”, The Conference Board, September 2016, accessed November 7, 2016, https://www.conference-board.org/data/globaloutlook/.

[30] “Subdued Demand -Symptoms and Remedies”, World Economic Outlook (WEO), International Monetary Fund, October 2016, accessed November 7, 2016; http://www.imf.org/external/pubs/ft/weo/2016/02/.

[31] DJIA, Interactive Charts, 5-year and 1-year charts, MarketWatch, accessed November 11, 2016 http://www.marketwatch.com/investing/index/djia/charts?chartType=interactive&countryCode=US.

[32] Ibid., accessed December 30, 2016.

[33] Liz Ann Sonders, Brad Sorenson, and Jeffrey Kleintop, “Schwab Market Perspective: Is the Fog Starting to Lift?”, Charles Schwab, November 11, 2016, accessed November 12, 2016, http://www.schwab.com/public/schwab/nn/ articles/Market-Perspective.

[34] John Lombardi, “Billionaires Dumping Stock, Stock Market Crash is on the Way”, Profit Confidential, September 13, 2016, accessed November 7, 2016, http://www.profitconfidential.com/economic-analysis/upcoming-stock-market-crash/.

[35] Ibid.

[36] Ibid.

[37] Ibid.

[38] Burton Malkiel, A Random Walk Down Wall Street, (New York: W.W. Norton & Company, 2015), 31-33.

[39] John Tobey, “Wall Street Sets Sights on 2017, So Adjust your Thinking Accordingly,” Forbes, September 6, 2016, accessed November 7, 2016, http://www.forbes.com/sites/johntobey/2016/09/06/wall-street-sets-sights-on-2017-so-adjust-your-thinking-accordingly/#3886ecc175a6.

[40] Mark Hamrick, “Bankrate Survey: Many Stock Analysts Believe the Bull Market Will Continue into 2017”, Bankrate, March 31, 2016, http://www.bankrate.com/finance/ investing/market-mavens-survey-0316.aspx.

[41] S&P 500 Index Four-Year Election Cycle Seasonal Charts, Equity Clock, accessed November 8, 2016, http://charts.equityclock.com/sp-500-index-four-year-election-cycle-seasonal-charts.

[42] DJIA, Interactive Charts, 5-year and 1-year charts, MarketWatch, accessed December 30, 2016 http://www.marketwatch.com/investing/index/djia/charts?chartType=interactive&countryCode=US.

[43] Lisa Mataloni, “National Income and Product Account -Gross Domestic Product: Third Quarter 2016 (Advance Estimate)”, Bureau of Economic Analysis, News Release BEA 16-57, accessed November 5, 2016, https://www.bea.gov/newsreleases/national/gdp/2016/pdf/gdp3q16_adv.pdf

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[45] Frank Reilly and Keith Brown, Analysis of Investments & Management of Portfolios (Amherst: South- Western, Cengage Learning, 2012), p. 360.

[46] DJIA, Interactive Charts, 5-year and 1-year charts, MarketWatch, accessed December 30, 2016 http://www.marketwatch.com/investing/index/djia/charts?chartType=interactive&countryCode=US

[47] US Economic Outlook, FocusEconomics, accessed November 5, 2016, http://www.focus-economics.com/countries/united-states.

[48] US Department of the Treasury, Daily Treasury Yield Curves, November 10, 2016, accessed November 10, 2016; https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

[49] Fed Federal Funds Rate, American Central Banks Interest Rate, Global Rates.com, accessed November 10, 2016, http://www.global-rates.com/interest-rates/central-banks/central-bank-america/fed-interest-rate.aspx

[50] United States Fed Funds Rate, Trading Economics, accessed November 7,2016, http://www.tradingeconomics. com/united-states/interest-rate/forecast

[51] S&P 500 Index Four-Year Election Cycle Seasonal Charts, Equity Clock, accessed November 8, 2016, http://charts.equityclock.com/sp-500-index-four-year-election-cycle-seasonal-charts.

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