The recent GDP numbers that have been revised lower only confirm my belief that the U.S. economy should continue to underperform through the end of the year and into early next year. Although we are in the midst of the weakest recovery since WWII, we do have one of the better performing economies when you look at the rest of the world. As a result, I think that money will continue to flow into our markets which could help the equity markets slowly move higher. I still think it is too early to be confident of any market moves prior to the elections, but stocks have been hitting new highs recently, which indicates investor money from around the globe is flowing into our markets. I still think the Fed will raise rates once this year, but I am more confident that the rate hike should occur after the elections.
With the polls too close to call and the press clearly on the side of Hillary, I am encouraged that Trump is as close as he is since Romney was already dead in the water at this stage in 2012. Although the deck appears to be stacked against Trump, the American voter has a way of surprising me and I hope that we can finally have a President who can lift up and create a stronger America and not travel the globe apologizing for perceived wrongs in the past. Regardless of the Presidential election results, it appears that the Republicans will maintain the House and Senate majorities so they can hopefully act as a check against Hillary’s policies which she has been quoted as saying she wants to continue what Obama started.
The end of this month begins earnings season for corporate America and all signs are pointing towards another positive but not blowout earnings season, which should be good for supporting stock values. The bond market is waiting for the Fed to move again on interest rates and the accompanying statement from the Fed that should indicate the pace of more hikes in the future. I still think that no matter who is elected, it will be some time before any new pro-growth policies would have a substantial positive effect on the economy, so I think the Fed will raise rates very slowly over the next 18-24 months. After that, if we have a pro-growth President, we could begin to see stronger economic growth that could support the Fed raising rates more than once every 12 months. The good news is that the Fed slowly raising rates should be viewed as a positive for both stocks and bonds since the easy money Fed policy should still be around 2-3 years from now.
If you become concerned about the volatility this year, please contact my office. There are other financial products, such as fixed annuities**, that can reduce volatility in your portfolio without having to put your money in a low-yielding money market or CD. I would be happy to discuss ways we can reduce stock market risk in your portfolio, if that is a strategy you are considering.
Just a Thought
“Winners take the time to relish their work, knowing that scaling the mountain is what makes the view from the top so exhilarating.”
The views expressed are not necessarily the opinion of FSC Securities Corporation, and should not be construed directly or indirectly, as an offer to buy or sell any securities mentioned herein. Investing is subject to risks including loss of principal invested. Past performance is not indicative of future results. This material contains forward looking statements and projections. There are no guarantees that these results will be achieved. No investment professional or strategy can accurately predict market performance. The bond market involves risk. In general, when interest rates go up, bond values go down and vice versa, and this effect is usually more pronounced for longer-term securities. No investment strategy can guarantee a profit or protect against loss in periods of declining values. **Guarantees are subject to the claims paying ability of the insurance company.
The S&P 500 Index cannot be invested in directly, and is unmanaged.
Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Depending upon the municipal bond offered, alternative minimum tax and state/local taxes could apply. Generally, municipal bonds generate tax-free income, and therefore pay lower interest rates than taxable bonds. Therefore, municipal bonds may not be suitable for all investors. Please see your tax professional prior to investing.
There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. The price of commodities, such as gold, is subject to substantial price fluctuations over short periods of time and may be affected by unpredictable international monetary and political policies. The market for commodities is widely unregulated and concentrated investing may lead to higher price volatility. Sales of CD's prior to maturity may result in loss of principal invested. Federal deposit insurance generally covers deposits of up to $250,000 in the aggregate for each depositor in each bank, thrift, or credit union. A customer should ensure that purchasing any insured CD will not bring his or her aggregate deposit over $250,000 FDIC insurance limit. Investors should be aware that there is no FDIC insurance coverage for any principal losses that may be incurred.
These links are provided for informational purposes only and FSC Securities Corporation does not endorse or accept any responsibility for the content of these websites. FSC Securities Corporation does not guarantee the accuracy or completeness of the information appearing on the linked pages and does not assume any liability for any inaccuracies, errors or omissions in any information provided on the pages.
There are no guarantees that dividend-paying stocks will continue to pay dividends. Companies may reduce or eliminate the payment of dividends at any given time.