FARMINGTON HILLS ? It’s harder to find anything meaningfully positive when you stack the state of Michigan up against the country as a whole, David Sowerby, Chief Market Analyst for Loomis Sayles & Co. told a business group last week.
Some five years after the rest of the United States emerged from recession, the Michigan economy continues to lag the nation. Michigan?s economy is growing, to be sure, but the growth rates have not matched the US rates since 2001.
?We?re muddling along,?? Sowerby told several dozen members of the Great Lakes Angels, a group of high net worth individuals who invest in the up and coming start up companies, primarily in technology, that have been the focus of the state?s efforts for the past few years.
?We?re doing better than 2004. But structurally our gains are about 80 percent of the normal speed limit of US growth.?
Holding the state economy back is its No. 1 industry ? autos, Sowerby said. The good news about autos in this business cycle is the job loss is half of what it was during the previous recession in the 1990s.
The forward looking outlook, however, is less than rosy. Sowerby said the state won?t enjoy the tail winds it did in the 1980s and again in the 1990s when Michigan?s growth rate exceeded the national average. During those decades, cheap energy prices, lower tax and interest rates helped the auto makers sell cars and trucks. Now the tail winds have reversed and become head winds slowing the state?s economy growth.
The head winds are a dollar that has not depreciated enough against key foreign currencies ? primarily in China, Japan and the other Asian tigers ? making US goods, including autos, more costly overseas than they should be. Energy prices are up as well, making high profit trucks and sport utility vehicles made by General Motors, Ford Motor Company and Daimler Chrysler less attractive to consumers.
The economic picture for the non auto sectors in Michigan, however, are fairly strong, he said ? some 12 to 15 percent annual growth. He also sees more stock growth ahead. The reason is stock prices have risen some 90 percent since their lows in 2002, while profits are up some 115 percent, meaning stock prices need to catch up to the profit growth levels.
And where does he recommend investors to place their bets? For the next three years in the large cap market, the Blue Chip stocks that represent the nation?s largest companies. He didn?t say whether he?d recommend investing in the Detroit auto makers.
Another hot market will be international, where he said, using a baseball analogy, the game is only in the fourth inning.
For more on the Great Lakes Angels, click on GLAngels.Org
