SIDNEY — Community members were told 2018 will likely be another good year but to plan for a “mild recession” within the next five years during a gathering to learn about the economic outlook at the Sidney-Shelby County YMCA on Tuesday afternoon.
The 31st annual Economic Outlook Luncheon was presented to about 260 people Tuesday, May 1, by Fifth Third Bank, in partnership with the Sidney-Shelby County Chamber of Commerce and the Sidney-Shelby County YMCA. Jeff Korzenik, chief investment strategist/senior vice president of the Fifth Third Investment Management Group, was the keynote speaker.
Korzenik spoke about the investment cycle over the last two decades, the slow recovery since the recession, the peak in consumer confidence since the 2016 presidential election, and how employment will play a key factor in bringing an end to the current cycle. He also noted that interest rates are a point where they should begin to rise.
“Do worry, be happy,” Korzenik said when he began his economic talk.
“This year will be a little bit different. Investors in particular, have to be a little be concerned about the end of the business cycle. When you get this late in the cycle, you do have some stresses, with the rise in the interest rates — the Fed determined to raise interest rates; all of those things makes for a more challenging year for investors. As well as business owners, who are thinking about making plans for the next five or 10 years, have to start factoring in there that we will have a recession somewhere within in there,” Korzenik said. “But we think fundamentally, we have to be happy. The U.S. economy, in our view is going to have one of the better growth years.”
He posed the question, what will cause the end of the investment cycle? He said each cycle is different and explained how the last one ended due to the “over building in real estate and excessive leverage in the financial system.” He said this time around we will have a more traditional cycle where we run out of workers to keep the economy going.
“The workforce problem, we (financial advisers) believe, will ultimately bring an end to this cycle,” he said. “We are running out of labor.”
The opioid crisis is not just a social tragedy, Korzenik said, but also an economic issue, especially in Ohio. He pointed out that the U.S. needs 1.25 million workers to enter the workforce per year. However, a 2016 Princeton study revealed there has been a 20 percent reduction of male workers between 1999 to 2015, he said. The reduction is believed to be linked to an increase in opioid prescriptions.
The ability to bring people back, who are “ex-offenders,” to the workforce is a “bright spot” with the workforce problem, Korzenik said.
However, currently, the world economy has never been in better shape, Korzenik noted. “It doesn’t get better than this.”
He said 2017 was a great year for investors but not to expect a repeat of it. He noted that it is very unusual to have such a great year so late in the business cycle. The year 2018 will likely be another good year of growth, but he warned that it is late in the business cycle to anticipate much more growth in the following years.
Korzenik explained consumer confidence through a visual graph of the economic growth from 1997 to 2017. He said confidence has been mixed throughout the last recovery period, but from the end of 2016 — in the aftermath of the 2016 presidential election — showed a “big spike” in business confidence with capital investment/consumer spending through 2017. This year is expected for capital investments to continue, but Korzenik said there will not be the sudden economic “pick up” as with 2017.
In 2017 the U.S. dollar was weak, Korzenik said. He then explained some of the negatives and positives of a weak dollar. Korzenik said it is difficult to predict the strength of the dollar. For 2018 he jokingly said it will either go up, go down or stay the same, and explained the positives of each. But, although he said no disasters are expected, regarding the strength of the dollar, this year, they expect what ever happens to produce at least “a modest negative for the markets.“
“Are you happy with the portfolio you have. If not, make sure you have a portfolio that can help you survive the ups and downs. Make sure you are in it for the long term,” he told investors.
He advised business owners who are looking to expand or at some kind of commitment to factor in a recession into their calculations.