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A midyear market checkup from Wells Fargo’s chief investment officer

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Although growth will likely continue to slow this year, the U.S. economy is on track to attain the longest economic recovery since the late 1940s, as the current expansion extends past the 10-year mark in July. 

Darrell Cronk, president of Wells Fargo Investment Institute and chief investment officer for Wealth and Investment Management, was in Des Moines on Wednesday to provide a midyear market update for a group of about 120 of its Central Iowa business customers. I sat down with him before his presentation to get his impressions of what’s maintaining the growth, and how various threats could play out for the economy. 

Among the highlights for the U.S. economy at the midyear point is an “exceedingly good” labor market, with record-low unemployment and more job openings than unemployed Americans. 

Nevertheless, the pace of wage growth — which normally goes hand-in-hand with job growth — has been lagging, Cronk said. Although consumer confidence is high, consumer spending could be better if employers were increasing wages more. However, the average wage increase has picked up slightly from about 2% last year to around 3%.

As he summarized it in a just-released investor letter with Wells Fargo’s midyear outlook, “Resilient labor markets alongside a turn toward patient global bank monetary policy have calmed recession fears and should extend the life of this record-long expansion.” 

At the same time, lingering uncertainty about U.S.-China trade relations is somewhat dampening the stock market’s outlook. Cronk said his team at Wells Fargo is skeptical that any quick deals can be reached this year regarding agreements that would resolve the escalating tariff battle between the U.S. and China. 

Cronk said he also anticipates that earnings growth of publicly traded companies will dip significantly this year compared with the robust double-digit gains in earnings seen last year by the S&P 500. 

To read more takeaways from the discussion, click here.