11/27/2018

AFT Vantage Point

John Augustine Returns to Provide Economic Update

One of the best-received speakers at AFT engagements, Economist John Augustine, CFA, & Chief Investment Officer at Huntington Bank, returned to provide powerful insight and a financial forecast at the AFT 2018 Fall Summit in Hilton Head Island, S.C.

In a rapid-fire and informative fashion Augustine offered a narrative, which he summed up as “fairly optimistic,” to the AFT attendees about what he sees as developing themes in global and domestic economies and markets.

Specifically, Augustine provided the following insights:

• The U.S. economy is humming right now. He does not forecast a recession next year, or in 2020. Augustine noted that we have not experienced an environment like this since the 1980s. With repatriation, the tax cut for businesses, and increased government spending Augustine stated, “That's just not an environment where you see a recession.”
• Rates from the Federal Reserve will get more interesting next year. The market thinks the Fed is going to stop this tightening cycle at 3%. Noting, this isn't the first time the market and the Fed have been at odds since 2009.
• Stocks are having an okay year. Augustine noted, “It's overseas stocks that are having problems. We don't need to go head overseas for the growth right now. We can get it in the S”
• The interest rates in general are making it tough for banks because of the flatness of the yield curve. We're actually starting to think of a scenario, or scenarios, where we can see a steeper yield curve to help the banks out a little bit.
• In terms of growth and innovation, Augustine pointed out in the AFT audience there are buyers, sellers, those trying to disrupt and those trying to avoid disruption. Other areas of disruption include retail, the auto and real estate industries. Growth areas include education, energy, healthcare and transportation.

In terms of other trends, Augustine observed business optimism is at a record level; and business openings in this country, far outpacing business closings. “Small businesses are the engine to our economy and it's going very well right now, thank you.”

He noted some items of concern as well. Banks are worried that companies are going to have too much cash available from the tax cuts and increased profits in general moving forward.

Augustine suggested Europe is very interested in how the trade talks between the U.S. and China go “because they're in the same place where we are with a big trade deficit versus China. It's not a tit for tat between the U.S. and China, but the world against China and China's not sure quite how to react right now.”

He emphasized the importance of a balanced attitude as well. “If we're successful in our home life, chances are that makes us even more of a success in our business life.”