February 17, 2019
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How to navigate the coming ups and downs in the economy

Richard Drew | AP
Richard Drew | AP
Trader Gregory Rowe works on the floor of the New York Stock Exchange, Friday, Jan. 18, 2019.

Investors and retirees worried about the volatility in the stock market might take heart that economic indicators show a generally positive economy nationwide in 2019, with some notable exceptions.

“Equity markets aren’t the best predictors of recessions,” Leslie Preston, senior economist at TD Economics, told the Maine Real Estate and Development Association conference Thursday in Portland. “We’ve had a lot of false signals in the past.”

Preston said the stock market spikes aren’t the type that are normally seen prior to a recession.

“We don’t believe we’re headed into an imminent recession in the United States,” Preston said.

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She said the U.S. economy should continue to be strong, but growth is expected to slow in 2019, along with global growth.

While the $1.5 trillion federal Tax Cuts and Jobs Act of 2017 boosted household spending and business development in 2018, this year trade uncertainty, import trade tariffs and the fade-out of the tax cuts will put some downward pressure on the economy, according to Preston.

The tax cuts boosted the real gross domestic product, a measure of economic growth, by 3.1 percent in 2018, but that is expected to taper off to 2.1 percent this year and 1.7 percent in 2020. The government shutdown, however, could push the 2020 growth rate down to 1.2 percent, which she said is very anemic.

The unemployment rate is close to a generational low in the United States, as well as in all of Maine, Portland, Lewiston-Auburn and Bangor.

One positive note in Maine is that net migration has been rising since the early 2000s. People moving to Maine could help fill gaps in the workforce.

Preston expects more modest growth in home prices in 2019 of 2.1 percent nationally and 1.9 percent in Maine. Last year, house prices rose 5 percent overall in Maine, she said.

Toward the end of 2019, she predicted some fiscal risks including the high federal government debt and high corporate debt.

“We are closely watching non-financial corporate debt in the United States,” she said. “Companies have loaded up on debt in this period of low interest rates.”

Another headwind is slowing demand for manufacturing, which may cause manufacturers to curtail investment and not hire.

WEX to buy employee benefits company

WEX, a corporate payment processing company based in South Portland, said Thursday that it had signed an agreement to buy Discovery Benefits Inc., of West Fargo, North Dakota.

The deal is valued at $425 million. It is expected to close in the first quarter of 2019, subject to regulatory approvals and other customary closing conditions.

Discovery Benefits, an employee benefits company, is owned by State Bankshares of Fargo, North Dakota. State Bankshares will retain 5 percent equity interest in the combination of Discovery Benefits with WEX’s health division.

Discovery Benefits has been a partner of the WEX health division for more than a decade.

“The acquisition of Discovery Benefits enhances WEX’s position as a leading technology platform in the healthcare space and aligns with our longer-term strategy to further reduce exposure to macroeconomic forces,” Melissa Smith, CEO of WEX, said in a prepared statement.

The acquisition will let WEX extend into the employee benefits market.

Devenir, a research firm, listed Discovery Benefits in its top 20 health savings account providers. Devenir said the company had about $100 million in revenue in 2018.

 



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