Market Outlook

Thrivent CIO shares a broader economic view.

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By David Royal

If you pay attention to headlines these days, it’s hard to miss the fluctuation in the markets. And while it’s easy to focus on the day-to-day factors impacting market performance, it’s important to take a look at the economy from a broader perspective. 

Our more than 100 investment professionals at Thrivent always are analyzing economic information. So, what are we seeing?

This fall, U.S. manufacturing contracted by some measures, which indicates that the manufacturing portion of our economy has weakened.  Now, manufacturing globally, especially in Europe, has been in recession for several quarters.  So why isn’t the U.S. economy in recession?

While manufacturing has struggled (likely due in part to trade tensions), it’s been offset by the service portion of the economy, which is composed of industries like healthcare and education. The service portion has been stronger, both domestically and internationally. And since manufacturing makes up a smaller part of the economy in the United States than in Europe, it’s contributed to our economy’s relative outperformance. 

Employment in manufacturing is another important consideration.  There are now nearly twice as many jobs in healthcare and education services than in manufacturing. As recently as the 1980s, that ratio was reversed. In short, the U.S. economy is now much less dependent on manufacturing jobs than it used to be and less dependent than most of the world is today.

A similar contraction in manufacturing occurred in 2016. But consumer spending and the service economy remained strong and we didn’t go into recession. And then 2017 was a great year for stocks.

At Thrivent, we’re watching closely to see whether the service sector and consumer spending can overcome weak manufacturing once again.   

David Royal is chief investment officer at Thrivent.

All information and representations herein are as of October 14, 2019, unless otherwise noted.

The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Thrivent Asset Management associates. Actual investment decisions made by Thrivent Asset Management will not necessarily reflect the views expressed. This information should not be considered investment advice or a recommendation of any particular security, strategy or product.

Asset management services are provided by Thrivent Asset Management, LLC, a registered investment adviser and wholly owned subsidiary of Thrivent Financial, the marketing name for Thrivent Financial for Lutherans.