Economic growth in a country occurs when the general standard of living increases. This means that individuals are able to get jobs, have some disposable income, have savings, and go out and spend. In turn, this causes businesses to produce more, create more jobs, and so on—in other words, the wheels of economic growth continue to turn.
Sadly, the U.S. economy appears to be far from that. Many get the impression that key stock indices increasing means economic growth, but this is certainly not the case.
If the U.S. economy was experiencing economic growth, one would assume that Americans are living well and spending on goods they want. However, according to a Gallup survey conducted in August, 20% of Americans experienced times during the past year when they couldn’t afford food; in June, this number stood at 17.7%. This was the first time in the last 68 months when 20% of Americans had troubles affording food. (Source: Brown, A., “More Americans Struggle to Afford Food,” Gallup web site, September 12, 2013.)
The misery in the U.S. economy doesn’t end there. There are more trends showing economic growth just isn’t there.
According to a poll by the Associated Press-NORC Center for Public Affairs Research, 82% of Americans aged 50 and older say they will likely work during their retirement, while 47% of Americans expect to retire later than their anticipated time of retirement. (Source: Sedensky, M., “Poll: Half of older workers delay retirement plans,” Yahoo! News, October 15, 2013.)
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If Americans being unable to afford food and soon-to-be retirees rethinking their options are what count as economic growth, then what would an economic slowdown in the U.S. economylook like?
The fantasy is different from the reality. Let’s face it, more needs to be done in the U.S. economy if we are hoping for real economic growth. Money printing and easy monetary policy have been giving us an impression that things are alright, but that’s clearly not the case.
When will we get economic growth in the U.S. economy?
Looking at these dismal factors, it’s hard to say when the U.S. economy will turn and start to see real improvements, such as the unemployment rate declining, consumers having confidence, and wages increasing.
With all this said, what is an average investor to do when they see dismal facts about the U.S. economy, but see key stock indices gaining in value? As counterintuitive as it may sound, the trade seems to be higher on key stock indices, meaning that the markets are taking any bad news as good news, and good news to be better news.
Investors who want to profit from this situation may want to look at exchange-traded funds (ETFs) like the SPDR S&P 500 (NYSEArca/SPY).
Investors have to keep one thing in mind: when this “bad is good, good is better” behavior is appreciated, irrationality prevails, and when reality comes into the picture, it isn’t the prettiest sight. If investors want to profit from this situation, they have to be very careful and use proper risk management with their portfolio.
This article Over 80% of Americans to Work During Retirement to Make Ends Meet was originally published at Daily Gains Letter