Financial Focus: ls the stock market following the economy? Why or why not?

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By Professor Anthony Rivieccio MBA PFA

So what’s really happening to our economy during COVID? And is it tied in to your money? 

Well remember our money is  supposed to be following our economy and Visa versa right? 

Let’s take a quick look. Let’s start with consumer spending. Consumer spending is the total money spent on final goods and services by individuals and households for personal use and enjoyment in an economy. Contemporary measures of consumer spending include all private purchases of durable goods, nondurable goods, and services. Consumer spending represents 70% of Gross Domestic Product ( GDP).

July 2021    0.3 percent

June 2021    1.1 percent

May 2021    0.1 percent

April 2021    1.0 percent

4 months 2.5%

12 months: 7.5%

Investment spending is Money spent on capital goods, or goods used in the production of capital, goods, or services. Investment spending may include purchases such as machinery, land, production inputs, or infrastructure. Investment spending currently represents 10% of GDP.

Investment Spending is growing annually at 5%

Another component: Government Spending. In simple terms: how much money did the government bring in on taxes and how much did they spend.This represents 20% of GDP.

Government Receipts and Expenditures

Current receipts

Q2 2021 (2nd)    $6,569.6 

Q1 2021 (3rd)    $6,301.8 

Increase 4.1%

Increase in 1 year: 12.3%

Current expenditures

Q2 2021 (2nd)    $9,047.8 

Q1 2021 (3rd)    $10,402.5 

Increase 15%

Increase in 1 year 45%

Note that I will not cover the final component: net exports,  as it represents 10% or less of GDP. 

So this means on an annual basis :

Consumer spending is 7.5% or 5.2% annually

Investment Spending is 5% a year 0.5% ,annually

Government Spending up ( after receipts ) 33% or 6.6% annually

What is GDP? Gross Domestic Product, which is a comprehensive measure of the U.S. economy and its growth. The expenditure approach to calculating gross domestic product (GDP) takes into account the sum of all final goods and services purchased in an economy over a set period of time. That includes all consumer spending, government spending, business investment spending, and net exports.

So looking at all of the above components equal

 Q2 2021 GDP

+6.6%

Q1 2021 GDP

+6.3%

Increase : 4.5%

Increase in 1 year 13.5%

So what do all these numbers mean? Good news! Our economy is rolling along but consumers do not understandably spend all of their money whether it’s though work or government assistance. Today our economy is economically supported by Government. Whether it’s stimulas, tax credits, business PPP and so on. Personal savings ( an indicator not a component) is up annually at 10%. That is currently a 25% yr over yr increase. 

Is that good long term for our economy : well , while that’s up to one’s opinion, let’s look to see if it’s been translating to your pocketbook: 

Dow Jones Stock market Performance

1 Month    1.58%

3 Month    5.65%

YTD              15.94%

1 Year              26.84%

So is the stock market chasing Government Spending? Or is Government spending chasing the market. This is a crazy economy!. We believe there is a serious disconnect! On the other hand , who knows, the new normal is wearing a mask, right?. The moral of this story: Talk to your advisor about your money and 401k help. While I’m sure your enjoying your retirement account,  note, if the above is true, then that could mean that once the government slows down on their consumer and business benefits, the market and your 401k, could slide down as well. 

Professor Anthony Rivieccio, MBA PFA, is the founder of The Financial Advisors Group, celebrating its 25th year as a full service financial planning & investment firm . Anthony is also owner of Rivieccio Financial Advisors, a virtual only financial advisory firm, opened in 2021. Mr. Rivieccio, a recognized financial expert since 1986, has been featured by many national and local media including: Kiplinger’s Personal Finance, The New York Post, News 12 The Bronx, Bloomberg News Radio, BronxNet Television, the Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS 1010 Radio, The Co-Op City News, The Bronx News, thisisthebronX.info and The Bronx Chronicle. Mr.  Rivieccio also pens a financial article called “Money Talk”. Anthony is also currently an Adjunct Professor of Business, Finance & Accounting for both, City University of New York & Monroe College, a Private University. For financial assistance, Anthony can be reached at (347) 575-5045. Have Facebook? My personal page is www.facebook.com/anthonyfromthebronx

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