Those of you who read the newspaper frequently may note over the past month that I have reflected on some unusual experiences that have occurred in my long career. Meanwhile, the world turns and a mixture of blessings and madness continues. I thought I could go back and consult with “experts” and get their take on the state of the economy – and its potential impact on your portfolio.
The past few weeks have seen a handful of bumps in the road, but none of the traditional type of “10% fix” that tends to push a lot of action. It felt more like a handful of sales placed on big American corporations so that those who pay attention can put money to work.
While there is no shortage of bad news to keep the news cycle alive, the market continues to hold on to a near all-time high. On the surface this seems counterintuitive, with the debt ceiling debate, the administration’s difficulty in pushing through its massive (trillions of dollars) agenda despite its majority position in government, the Afghanistan debacle. , the problems at the southern border, hurricanes, fires, homicides, and oh the pandemic! We are now approaching 700,000 deaths in the United States. I think I annoyed you with just a sampling of what appear to be barriers to a healthy investment environment. Lest I let my oil and gas friends down, remember that oil went over $ 75 / barrel and natural gas hit a point over $ 5 / million cubic feet. This is a positive change for the producers of these products and the industry that provides them with services.
So what do experts say who try to explain this apparent challenge to economic gravity? I met Saira Malik, the investment director of Nuveen Equities. She points out a handful of things that really matter. 1.) There is considerable concern about the Federal Reserve suggesting multiple interest rate hikes by the end of 2023. This would be negative for market growth. However, the moderation in economic growth during this period is expected to slow the pace of rate hikes. Of course, the Fed’s goal in raising rates is to slow an overheating economy – and if it slows down in a few years, it might not be necessary. However, no one wants to have a default on our pristine US Treasury debt under their watch – so as they’ve done 78 times since 1960, they’ll likely fix the debt ceiling problem within seconds. . There is more concern about higher taxes to pay for a bigger government than a lowering of the credit rating in the United States. 3.) As the Delta variant shrinks, Nuveen expects a short-term resurgence in economic growth.
Stephen Auth, executive vice president and chief investment officer at Federated Hermes, sees it a bit the same way. He suggests that the odds of a short-term market correction look strong. However, at the same time, he adds that the long-term outlook is positive. Here are some reasons he is sticking to his bullish market forecast for the end of the year and 2022: 1.) The economic re-acceleration we expected, although delayed by the Delta variant, is coming soon. It is not a question of “if”, but of “when”: the fundamentals of the economy are solid and the prospects of recession seem distant. This is partly because there is a lot to be gained in a group of so-called “reopening actions” that have yet to see their “day in the sun”, but it is happening. 2.) Corporate profits remain healthy and growing. Even with the tax hikes proposed by Biden, Standard and Poor’s earnings next year and through 2023 are expected to reflect solid growth of 8-10% above the already improved 2021 results.
There are countless other sources I could cite as to why a seemingly crazy world has yet to negatively impact your investment account. There are even hordes of pessimists who can give you a contrary opinion. For their benefit, let me add that in any market there has to be a loser to allow a winner. Every seller needs a buyer. So let me once again encourage you to stay close with a trusted advisor who can guide you through the complexities of today’s landscape to a profitable outcome.
The opinions expressed in this document are for general information only and are not intended to provide specific advice or recommendations to an individual. To determine which investment (s) might be right for you, consult your financial advisor before investing. The economic forecasts set forth in the presentation may not develop as expected and there can be no assurance that the strategies promoted will be successful. The referenced performances are historical and do not guarantee future results. Not all indices are managed and cannot be invested directly. Investing involves risks, including loss of capital.
RFG Advisory and its investment representatives do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied upon, for tax, legal or accounting advice. Please consult your own tax, legal and accounting professional for advice on these matters.
Visit us at www.williamsfa.com. Tommy Williams is a Professional CERTIFIED FINANCIAL PLANNER ™ with Williams Financial Advisors, LLC. Titles offered by representatives registered via Private Client Services, member of FINRA / SIPC. Advisory products and services offered by investment advisory representatives through RFG Advisory, a registered investment adviser. RFG Advisory, Williams Financial Advisors, LLC and Private Client Services are unaffiliated entities. The branch is located at 6425 Youree Drive, Suite 180, Shreveport, LA 71105.