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U.S. GDP expanded at a blistering 4.9% annual rate in Q3, and has fully recovered from the pandemic. Many Americans don't feel very good about it.

The Unloved U.S. Economic Expansion The U.S. economy is charging ahead. Few are happy about it. According to the "advance" estimate from the Bureau of Economic Analysis, U.S. GDP expanded at a blistering 4.9% annual rate in Q3, a significant jump from the pace set in the first half of the year. A strong labor market and rising wages continue to bolster consumer spending, which has remained resilient all year. Q3 output was also boosted by increases in private inventory investment, government spending, and exports.1 All told, the U.S. economy has recovered fully from the pandemic, and the current unemployment rate of 3.8% is just a tick higher than it was in January 2020, before the pandemic hit. Monthly payroll growth has averaged 258,000 per month over the past year, with average hourly earnings rising 4.1% year-over-year in October. Since inflation as measured by the headline PCE price index came in at 3.4% year-over-year in September, the takeaway is that Americans are seeing "real wage growth." Indeed, real disposable income rose 3.0% during the first nine months of the year. The Economy is Changing – What Happens to Your Investment Portfolio? The current economy can cause uncertainty for long-term investors – no one knows what lies ahead. To make sure your portfolio is protected, I recommend focusing on fundamentals and data to better guide your investing decisions. Our exclusive November Stock Market Outlook Report gives access to key forecasts to consider as we focus on the final quarter of 2023, such as: Top-down S&P 500 year-end 2023 target Setting return expectations for 2023 International update on key global regions And more… If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today! Download the November 2023 Stock Market Outlook Report 2 Americans are earning more, the economy is growing, and household net worth has surged. From the end of 2019 through the end of Q2 2023, household net worth rose $37.6 trillion, a 37% increase even when adjusted for inflation. That's the fastest surge in new wealth ever recorded. It's clear, in my view, that by most fundamental measures, the U.S. economy is in solid shape. But many Americans don't feel very good about it. In October, measures of consumer confidence and consumer sentiment both fell, marking three consecutive months of souring on the economy. The Conference Board's index of consumer confidence fell to 102.6 in October, returning to levels last seen in late 2022 (which, recall, was a year of rising interest rates and a bear market). Consumer confidence metrics fell across a broad range of categories, spanning consumer outlooks for income, business, and employment. The University of Michigan consumer sentiment index has also been bouncing around relatively low levels, as seen on the chart below: Source: Federal Reserve Bank of St. Louis 3 The University of Michigan consumer sentiment index is essentially at levels consistent with recession, yet the economy is nowhere near contraction territory. One key explanation for the disconnect is inflation. In the University of Michigan's survey, 40% of respondents said they felt worse off because of inflation. We know inflation has been locked in a downtrend, but the issue in times of rising prices and rising wages is that consumers focus far more on prices. We also know that while the Federal Reserve is focused on inflation's rate of change, consumers tend to focus more on how much things cost nominally. With inflation's surge in 2022, the prices for everything from food to clothing to concert tickets reset to higher levels, which bothers consumers on an ongoing basis. While it's true prices are no longer rising as quickly as they were last year, they are permanently higher – a reality that consumers don't frame in the context of their wage gains. From a purely economic and investment standpoint, however, there's a lot to be optimistic about, in my view. The fundamentals I mentioned above are no doubt strong, with growth and inflation both improving in the third quarter. And the fact that sentiment remains at a relatively low point might also be framed as a positive. Stocks tend to do well historically when economic fundamentals are under-appreciated, or when investors are more worried or pessimistic than they should be. I see both of those conditions today.  Bottom Line for Investors Focus on the fundamentals. The financial media and sentiment indexes will often paint the picture that there is a lot to be worried about, whether it's geopolitical conflict, inflation, domestic political issues, and so on. These issues matter, of course, but arguably not as much as the media says they do. U.S. economic fundamentals matter more, as do corporate earnings trends. And for now, both are heading in the right direction. To help you focus on the fundamentals, we are offering all readers our Zacks' latest Stock Market Outlook Report. 5 This report provides an in-depth perspective on the stock market and what can be anticipated from now until the year's end. For example, you'll discover Zacks's view on: Top-down S&P 500 year-end 2023 target Setting return expectations for 2023 What produces 2024 optimism What's alive for 2024 pessimists International update on key global regions And more… Prepare your portfolio for what lies ahead by reading this new report today. About Zacks Investment Management Zacks Investment Management was born out of one of the country's largest providers of independent research, Zacks Investment Research. Our independent research capabilities from our parent company truly distinguish us from other wealth management firms - our strategies are derived from research and innovation, including the proprietary Zacks Rank stock selection model, earnings surprise and estimate revision factors. At Zacks Investment Management, we work with clients with $500,000 or more to invest, and we use this independent research, 35+ years of investment management experience, and tools we've developed to design customized investment portfolios based on each client's individual needs. The end result is investment management that is research driven, results oriented and client focused. Talk to a Zacks Wealth Advisor today. © Zacks Investment Management  |  Privacy Policy 1 Wall Street Journal. November 1, 2023. 2 Zacks Investment Management reserves the right to amend the terms or rescind the free-Stock Market Outlook Report offer at any time and for any reason at its discretion. 3 Fred Economic Data. 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