During the post-financial crisis economic recovery, a few things have been true.
Overall GDP growth has been so-so.
Job gains have exceeded almost all expectations.
Asset markets have re-couped all of their crisis losses and then some.
But under the hood of these headline observations, Conor Sen at New River Investments identified the five elements of this recovery that have been real standouts: energy investments, auto sales, multi-family residential construction, tech job growth, and corporate borrowing.
And in Sen’s view, these five drivers are, if not totally maxed out, certainly past their best days.
Over the last year, the price of oil has collapsed, and as a result investment in oil-related businesses has slowed while production looks to finally be slowing.
Auto sales have been ripping higher, but in Sen’s view it’s unlikely that a continued increase in auto sales would drive meaningful additional growth.
Additionally, concerns around subprime auto lending have made some people nervous about whether or not we’ve created a bubble with eerily similar characteristics to what crippled the economy following the housing bust.
Meanwhile multi-family construction is at a 40-year high, tech jobs — which Sen admits is sort of a rough measure of adding San Francisco and San Jose metro area employment totals — have surged past their Nasdaq bubble peak, while corporate borrowing as a per cent of GDP is back at new highs.
And again, on their own none of these are smoking guns pointing to an economy that’s about to roll over, but Sen’s point is simply that these areas of the economy aren’t likely to show a huge amount of improvement going forward.
Overall, Sen is bullish on the US economy, and he has been one of the main proponents of the idea that we’re about to see a changing of the economic guard over the next several years.
In Sen’s view, millennials are going to form households and engage in much of the same spending behaviour that drove economic expansions in the 1980s and 1990s. The balance of power in the labour market is also likely to shift from employers to employees, leading to an uptick in wages and a resulting uptick in inflation.
And so things are still looking up long term, but the economic themes that have outperformed for the last few years are likely done and a new economic story is about to get underway in the US.
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