Choppy Pattern Is What Has Extended Growth Cycle

PHOENIX—“We are seeing a lot more uncertainty and a lot more headwinds starting to form.” That was according to John Chang , a first VP at Marcus & Millichap , while discussing the economy during a national webinar on Wednesday. According to Chang, “consumer confidence has approached where it was at the previous cycle… where it was prior to the recession.” He explains that from the consumer perspective, things are still looking pretty good. But with regard to the economy itself, “we have had a choppy pattern over the last six years.” And he anticipates that that choppy pattern is what has extended the growth cycle for so long. “But we still have some legs left,” he added. “We estimate the growth rate in 2016 will be 2% to 2.5%.” Andrew Alexander , president of Red Roof Inn , explained that he has seen a slower growth through a longer than usual growth cycle. “It seems like there is some momentum to keep things going but there is so much uncertainty out there that it could go one way or the other.” Ben Brunt , principal and EVP of acquisitions at Noble Investment Group , says that we are at a maturing point in the cycle where a more measured approach to investing is where the long term players should be…at least hospitality players. “If you play the cycles, now is probably not a good time to invest in the hospitality business.” Brunt encourages people to really do market research and drill down in the micro markets, if they are a long-term player. “Our visibility beyond two years is difficult to gauge.” Chang agreed that the caution level is elevated. “When it comes to the major driver of this cycle, we have had 64 months of employment growth. We are anticipating slower momentum than what we have seen in the past.” But Chang reiterated that is has been steady with a nice even balanced quarterly growth rate. Alexander points out that part of the uncertainty is when you combine this type of job growth with the treasury rate. “People don’t understand and when the top economists can’t explain it, it causes those in the investment community to question it. We are at that inflection point.” For more points from this webinar, click here.