George Mateyo, Key Private Bank's chief investment officer, was visiting Buffalo and chatting with someone whose business installs fiber optic cable.
The installation business was brisk, he was told. "The fact that there is demand for that – new construction, new buildings – says to me that things are probably pretty good," Mateyo said.
It was just an anecdote, but Mateyo likes gathering information from all over to help answer big-picture questions about how the economy is doing. And from there, developing investment strategies for clients.
Mateyo, 49, who is based in Cleveland, talked about the economy's health, the "quit rate," and the Browns' playoff chances.
Q: How is the national economy doing?
A: This economy's doing well. Unemployment is at a 50-year low. … On the back of a strong year, [corporate] profits continue to chug along quite nicely. Productivity is also starting to accelerate for the first time in a long time. That actually could be a really positive tailwind for the economy for quite some time.
Q: This expansion is long compared to others. What do you attribute that to?
A: Economies don't die of old age, is the first thing we would say. Just because it is the longest expansion, or likely to the longest expansion, that fact alone doesn't mean it's going to end. In terms of what's driving it, I think we're coming off a very, very deep recession still. ... So to some extent, we're still rebasing off that very significant draw down. But you've also had decent growth.
It's probably been also not only one of the longest recoveries, but one of the slowest recoveries, too. It's some of that kind of re-emergence of overall activity that we're still working off from 2008 and 2009, kind of prolonging this business cycle.
Q: What about wages?
A: Wages have started to pick up a little bit. It took a long time, and it was surprising how long it took to materialize. But wages are [increasing] in the low to mid 3 percent range, which is healthy, not super buoyant. I think employers are using other tools beyond just simple salary to try and retain and attract workers.
Q: Any threats to the expansion out there?
A: Lately, tariffs are front and center. We think that will eventually be a situation where level heads prevail, and we'll get some kind of a deal between China and the United States. If it doesn't and things really escalate and there's a pronounced deterioration of relations between the United States and China, that could be a significant headwind.
If anything else, it just really undermines confidence. Despite the fact there's a lot of rhetoric around this very sensitive issue, I think that both the United States and China have benefited from global trade.
Q: Unemployment is low, and companies say it's hard to find available talent. Does that pose a risk?
A: I think it is somewhat sensitive. There's a survey called the quit rate, how many people actually quit their jobs. That's a funny sounding statistic, but usually when the economy's doing well, people feel comfortable quitting their job, even if they don't have another job to go to. They think that, "I'll take some time off, have a nice summer break with my family, and that the workforce is so well endowed that I can re-emerge and re-engage later." The quit rate is also at record highs.
Q: What general advice can you offer about investing?
A: I'd watch out for too much pessimism and too much optimism. Watch out for the extremes.
I think investors need to have a plan. I'm a big proponent of writing things down as to why you own something, not just because, "I think it's going to go up," not because, "I think I can sell it somebody else down the street for a higher price later," but really, why do you invest, and what are you trying to achieve with that money?
So having a really good sense of your objectives, define those objectives with as much precision as you can, putting that off to the side for a year or two, and then revisiting it with some of the other things that are important.
Q: Will the Cleveland Browns make the playoffs this year?