This article was last updated on December 14
With all the doom and gloom headlines splashed across the financial media it is no wonder that everyone thinks we are headed for the next great depression with little hope of a recovery. Yet there are definitely some positive economic signs out there amid all the negative press – you just need to look past all the bad press! Now I am not saying things aren’t bad or that we are not in an economic slump, I have myself written some downbeat posts about our economic outlook, but I do feel that all too often we focus on the negatives rather than some of the positives. Here are some examples of recent positive economic developments that we can all benefit from now and take as optimistic signs for the future.
1. Lower Oil and Gas Prices. Crude oil prices have dropped more than 25% in the last 2 months and the US dollar has strengthened considerably. These two factors alone have contributed to lower gas prices at the pump and something we can are all directly (transportation costs) or indirectly (lower food prices) benefiting from. While I do think oil prices will go back up in the longer term, the current respite should help all our bottom lines and hopefully remind our government about the benefits of lower energy prices and why a long term energy plan for our nation is a must.
2. GDP growth. The economy continues to grow, albeit slower than most would like. In fact the future also looks brighter with the OECD recently raising their estimate of America’s GDP growth. Despite a weak jobs report and gloomy housing data, keeping a positive growth rate in current economic conditions is truly a sign for optimism.
3. A stronger US dollar. The dollar has rebounded strongly of late. Up around 10% against the Euro and Pound, and more than 20% against the resource driven Canadian and Australian dollars. While this does dampen our export growth, it is good news for airlines, overseas travelers and shoppers buying (imported) electronics to clothing goods. The higher dollar also provides a natural hedge against rising inflation and the need to raise interest rates – always a good thing in tough economic times.
4. Once in a lifetime investment opportunities. We have all read stories about those investors who got in early and made millions from stock investments in companies like Microsoft, Apple and even some of our large and battered financials. However over the last two years a lot of once high flying companies have had their stock prices coming crashing back to earth. With across the board falls in stock markets, there are now lots of well known dividend paying stocks available at once in a lifetime bargain basement prices that offer the potential for you to become one of these storied investors. If you are an investor with a long term view this could provide multiple opportunities to get into some great brand name companies like Citibank (C), General Electric (GE) and even Microsoft (MSFT) at very attractive price points. When the economy does fully recover, as it surely will, these stocks will boom and so will your portfolio. For a less risky and more diversified option invest in a large low fee S&P 500 fund using the benefits of dollar cost averaging to slowly build your investment portfolio.
5. Housing affordability at its highest levels. At the turn of this century and for a few years after that, homes were almost unaffordable to the average American family in most major cities. Buying a house in a good neighborhood and school district for less than half a million dollars was hard to do without facing onerous debt obligations or having to take on exotic loans (and hence the sub prime mess). However, the silver lining from the housing crisis is that home prices have dropped all over the country and especially in metro areas around Los Angeles, Chicago and Washington DC – areas that experienced some of the biggest price jumps and drops in affordability. So for those who have lived within their means, enjoy stable jobs and have enough money saved for a 20% down payment now is the time to find great housing deals or even upgrade to much nicer house and neighborhood at a much lower cost.
There you have it, five reasons to look on the bright side of things for a change. All this being said you still need to proceed with caution, especially if there is more economic turbulence ahead. Keeping an emergency fund, controlling your spending and doing your best at work/business will mean that you will be better prepared if things turn worse and position yourself to reap the benefits once things starting looking up again more permanently.