As we go to press we are about to set a financial record. You might think we are talking about a record close for the S&P 500 (that was set on April 29, 2019) or the NASDAQ (also set on April 29, 2019). But you would be wrong. We are talking about the longest uninterrupted economic expansion in US history.
According to The National Bureau of Economic Research (NBER) which tracks the beginning and ending dates of economic expansions, the current longest period of economic expansion is 120 months and ran from March 1991 to March 2001. Coming out of a mild recession in the early 1990s job growth remained weak, hampered by mass defense-related industry layoffs following the end of the cold war. Economic growth solidified by 1993 and home prices rebounded in 1995. The latter half of the decade saw the rise of the dot-com bubble which along with a cut in capital gains rates drove stock valuations to record highs. The Federal Reserve began to raise interest rates in 1999 and in March 2000 the stock market peaked. September 11, 2001 added an unexpected blow and what followed was a 49% decline in the S&P 500 that ended in October 2002.
The current expansion follows on what has been called the Great Global Recession which began in the fall of 2007 and ended in May of 2009. The cause was a bubble in the real estate market and out of control risk taken on by individuals, banks and financial institutions in the mortgage markets. Credit dried up, unemployment rose to record levels, global central banks cut interest rates to and bought billions of dollars of bonds to support economies worldwide. Recovery has been positive but weak. Unlike every previous post-war expansion GDP has not surpasses 3% for any calendar quarter.
So here we are finishing the 118th month of expansion (April 2019) and unemployment is at a record low of 3.8%, the US stock markets are at all-time highs, first quarter GDP was a strong 3.2% and inflation is consistently below the Fed’s targeted 2% per annum. The Fed has stopped raising rates and global rates still hover around zero. The record for the longest expansion appears in sight and there is little that should impact it between now and July. Now that’s one for the record books.
-The Leisure Capital Management Team