The US Economy is A Lot Stronger Than You Think

Warren Buffett is so rich that when his stock Berkshire Hathaway drops 2%, his net worth falls $US1.4 billion.

And that’s exactly what happened this week. Because one of Berkshire’s largest stock positions is in US bank Wells Fargo.

Wells Fargo’s reputation and stock price are under pressure after news of widespread improper behavior from its employees.

It just goes to show that even the best investors have bad days.

I don’t think Buffett will be too sad though. In fact, the latest news out of the US will be pleasing for a man who runs a company as exposed to the American economy as his.

American incomes are rising. This development is extremely important…

Rising income will drive the US economy forward

The Census Bureau said this week that the median household income in 2015 was up 5.2% from the previous year. It also happens to be the largest one year increase since record keeping began in 1967.

So the US consumer isn’t quite as dead as the narrative has suggested over the last five years.

Naturally the sceptics and perpetual doomers will latch on to the fact that median income is still below what it was in 2007 if you adjust it for inflation.

And it’s true. But the trend up has to start somewhere. With a strong housing market, rising incomes, low oil prices AND low interest rates, the US consumer has huge tailwinds to drive confidence and spending higher.

Why is this so important? Well, 70% of US GDP is from consumption.

But there’s another trend worth watching. There’s plenty of investment coming in from overseas, as well. Especially from China.

Huge money flowing into the United States

The Wall Street Journal cited a statistic late last month that US commercial property purchases are up 19% from China based investors in the first half of the year.

We’re talking big projects and big money in some cases. Just consider the following…

‘China’s Shanghai Municipal Investment said it was joining with New York-based Extell Development Co. to build the $3 billion Central Park Tower.

The condo skyscraper is set to rise 300 feet taller than the Empire State Building to become the tallest apartment tower in the U.S.’

All this building and construction is bullish for jobs and economic growth.

The 2008 financial crisis wiped out the US economy, and its taken seven years to get back to something like normal. But don’t be led astray – the US is back in business.

Best wishes,

Callum Newman

Associate Editor, Cycles, Trends and Forecasts

Callum is a feature editor for Money Morning. He covers areas of interest arising from world markets and the global economy that could mean new investment opportunities for Aussie investors.

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