Lexington, KY – “The U.S. economy is doing very well. But the word ‘well’ is a relative thing,” according to Anthony Chan, chief economist for private wealth management at JPMorgan Chase.
“We look at economic growth this year of not more than 2 percent. You may ask ‘Why is that so exciting?’ If you go to places like Europe, they’re not growing at all,” said Chan (pictured right) who spoke recently to JPMorgan Chase wealth clients at a dinner at Keeneland last week.
Chan, who travels extensively nationally and internationally to present clients with the latest economic and investment information, said if Americans compare our current U.S. growth rate to the way conditions were many years ago, you may become depressed. But if you compare the U.S. to conditions in much of Europe, where Greece, Italy, Spain, Portugal and Ireland, among others, are struggling “It’s a more exciting story.”
Chan told investors that earlier this year, the increase in payroll taxes and the Sequester probably subtracted 1.5 percent from U.S. economic growth. “If the federal government wasn’t contracting as much or taking as much from the economy, we’d grow this year at 3.5 percent.” But he added that some of the activity in Washington, D.C. was for a good cause – there’s too much federal debt.
On a positive note: “Last year, the S&P 500 gave us rates of return of 13.4 percent and so far this year it continues to do well, up 11 percent, year to date,” Chan said.
He said some investors waited on the sidelines expecting a market correction to come along at any time and they perhaps waited too long. “Yes, we probably will see a 5 or 6 percent correction at some point but they gave up 13 percent last year and 11 percent so far this year. You don’t have to be a mathematician to know they missed out.”
Chan, who is widely quoted in major business publications and who appears regularly on CNBC and Bloomberg TV, does economic analysis and research in support of Chase Private Client, a new program aimed at the bank’s wealthiest clients.
“We target individual clients who generally have up to $5 million in deposits and investments and they have banked with us for years,” explained Jamie Reed, this region’s director of wealth management for JPMorgan Chase. “When we looked at the services we had provided them, like investments and lending, we may not have been bringing the best of JPMorgan Chase. We recognized that treating all clients the same was not necessarily treating all clients the way they need and expect to be treated.”
Reed says the bank will share with this special clientele “strategies that have been applied to some of the wealthiest families in the world for the last 160 years.” The bank has dedicated teams at local branches focused on “a high level of personal touch,” Reed said.
Other suggestions Chan had for the JPMorgan Chase customers in the room: dip your toes into the equity well. “This isn’t to tell everyone to put all their money into the equity market, but you’ve got to be into it. Maybe phase in over a two or three or six month period, whatever you’re comfortable with, but have some exposure to that market.”
One area of the economy that is growing is housing. Housing starts are picking up which is rolling over into other parts of the economy. “The market was struggling because nationally, prices were down more than 30 percent, affecting 3-million jobs in the construction sector,” Chan said. “But now people feel empowered to make investments in housing. Over the last few years, no one wanted to invest in housing if three or six months later the price would go down.”
Chan also said spending on capital equipment is up, though not as strong as everyone would like, but that this development creates jobs.
On getting into the stock market, Reed said that investors should go in with the expectation of time in the market. “If you have a goal of five, 10, 15 years, with the right strategy and diversification in your portfolio, there’s never not a good time to get into the market,” he said. But Reed cautioned that an advisor is needed for guidance. “It’s not just one single investment or one asset class but the strategy. It varies for everyone.”
Also attending the dinner was Patrina Pettry, market manager overseeing all Chase retail branches in Kentucky. She commented on the changing role of bank branches that see fewer lobby visits or drive-throughs because many customers bank online. “The goal is to serve the client so branches have become very customer centric. If this is what the customer wants, we try to match what they want, which is most often convenience,” said Pettry.
As an example of Chase meeting the new needs of customers, Pettry touted the bank’s new self-serve kiosks in a growing number of branches.