Economic Analysis
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Economic Analysis
The Consumer sector of the U.S. Economy has struggled for the past decade; however in 2013 things are beginning to look up. It is predicted that in 2013 the U.S. Economy will see a 2% growth increase in GDP, consumption, and employment. In 2013 rising employment and financial assets will inevitably lead to an increase in consumer spending. This will be a small increase that will most likely come from middle class investors. The labor market is predicted to increase by about one million in 2013. This is looking great for the unemployment rate which has been estimated to drop as low as 6.5%. Overall the consumer sector is on path for a good year.
The business sector was predicted to be on a good path like the consumer sector however there have been some setbacks. One of these setbacks is business spending has not increased significantly. This means that businesses are still not confident in the economy. In order for the economy to flourish it is essential that investors gain back a sense of confidence to invest. Another factor is the S&P 500 growth has been affected more by the world economy than expected. Another thing that is predicted to hurt the business sector is regulation. Many feel the government is responsible for putting us in this whole in the first place, and should stay out of the way now, they will only make matters worse and hurt confidence in the economy for investors.
The international sector is in shambles. A stronger dollar mean less corporate growth overseas. This is not good because multinational firms have around 30% of their revenues from non-U.S. markets. Also loose policies has caused over-indebtment which transferred debt from the private to public sectors. Also the “buy American” theory that has been a trend of the past has been proven to hurt both the United States and other countries. This will lead to deglobalization which will hurt the international sector. The international sector continues to be in shambles and drastic changes need to be made soon.
Source – Our Outlook for the Economy
By Robert Johnson, CFA | 12-26-12 | 06:00 AM
Industry Analysis
The consumer discretionary sector consists of businesses that sell nonessential goods and services. According to Vanguard the S&P 500 index allocates 11.50% of their portfolio to consumer discretionary. Three high rated stocks are Makita corp(MKTAY), Fisher Communications inc(FSCI), and Naspers limited(NPSNY). I would overweight consumer goods because in the past this sector has done well while the economy is in expansion.
The consumer staples sector consist of household items such as food or beverages. According to vanguard the S&P index Allocates 10.90% of their portfolio. Three companies in the consumer staple sector are Supervalu Inc, Walgreen Co, Naturel Grocers by Vitamin Cottage Inc. I would underweight consumer staples because they seem to perform best on the trough of the business cycle.
The energy sector consist of companies in the production and sale of energy, including fuel extraction,