The US economy has been a tale of two stories in 2023, with manufacturing in recession while services have consistently grown. The good news is that the US economy is dominated by the service sector, which accounts for close to 80% of GDP.

Manufacturing in recession

In November, US manufacturing contracted for the 13th straight month. All five subindexes that directly factor into the Manufacturing PMI are in contraction territory, compared to four in October. Of the six biggest manufacturing industries, only two (food, beverage & tobacco; and transportation equipment) registered growth in November.

Services still strong

In contrast, the US services sector has been expanding for 11 consecutive months, with a reading of 52.7% in November, representing a 0.9 percentage point increase over October. Over the past three years, the service sector contracted for just one month, in December 2022.

Runnymede favors investing in the service sector because these companies consistently deliver earnings growth, quarter after quarter, year after year – akin to the steady rhythm of a train, “kerchunk, kerchunk, kerchunk.” Many of these companies have recurring revenue streams with loyal customers. The owners/founders are highly entrepreneurial, having built their businesses from the ground up. We seek service companies that are highly profitable, don't require excessive debt, and are less susceptible to cyclical fluctuations.

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