We want to thank those who have previously served in the military, those who are currently serving, and all their families who have made sacrifices for our country. We also want to give a special shout-out to our very own, Felicia Ludlum, and a huge thank you to all who have made the ultimate sacrifice.
History of Recessions
Over the past three weeks the U.S. and Iranian tensions have flared up. We think because of that situation that it’s important to point out what has happened in history in that oil has been the cause of most of the recessions. For instance, a recession started after the Saudi Arabia Oil Embargo in 1973 and 1974. A recession began after the Iranian Revolution of 1979 and again after the Iraq invasion of Kuwait in 1990. We’re watching the Middle East carefully to see if that situation will cause an oil spike.
Last week we talked about the U.S. consumer and how they think about the overall health of the U.S. economy. One thing that we see lagging right now is retail sales. We think with the consumer sentiment coming out and being positive that we could start to see retail sales begin to drive up. This has also been the biggest contributor in the lag for job growth, so we are hoping that it turns around soon. We are hoping that the spike in oil will not hurt the U.S. consumer and that the consumer will start spending more and retail sales will go up. When you see a big spike in oil, that sucks a lot of oxygen out of consumer spending. People tend to drive less because of the cost of driving and if you’re not driving as much typically, you’re not spending as much. We will see people start to pay more attention to the pumps especially on this Memorial Day holiday weekend. I’m sure everyone has noticed the price at the pump increasing a little bit so how big of an impact will that have on consumer spending? Will we see a pullback if gas prices go up, on retail sales and/or consumer sentiment? This will be the first time we’ve really had a Middle East tension spike in a world where the U.S. is a net exporter of energy. It’s going to be a first-of-its-kind to watch and will be interesting to see how it plays out.
Something that will hopefully help consumer spending is that in the first quarter of this year U.S. corporations paid the highest number of dividends in history. A large amount of $122.5 billion in dividend payments went out to U.S. investors. That’s a hefty 8.3% increase over the last year. This is good on two fronts and the first one being that it’s putting cash back in investors’ pockets. Investors are given the option to either reinvest or spend it. The second is that companies rarely increase dividends if they think things are going to get rocky in the near term because it’s difficult to cut a dividend once it’s increased. It’s a good sign that CFOs and CEOs are confident enough, at least about the intermediate term, that they believe they’ll be able to consistently pay this high of a dividend. Normally companies will do a one-time buyback of stock if they don’t believe in the long-term future. A dividend is something that once it’s set, it’s typically paid in perpetuity. So, again, this payout was a very good sign for U.S. investors.
Bobby Norman, CFP®, AIF®
Senior Vice President
Email Bobby Norman here
Trey Booth, CFA®, AIF®
Senior Vice President
Email Trey Booth here
Associate Vice President
Email Adam Vansant here
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
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