4th Quarter Economic UpdateSubmitted by InFocus Financial Advisors, Inc. on October 3rd, 2017
Economic Update by: Robert S. Jeter II, CFP®, CRPC®
As good as it gets? Have you ever heard the saying "too good to be true?" Those are the words that would come to mind if someone stopped me on the street and asked my opinion on the markets. To say this year has been somewhat of an anomaly would be a slight understatement.
As of the start of the 4th quarter, we have never, in the history of the market had a year in which we did not have any sort of significant volatility. We have quite literally not moved greater than 2% in either direction on any trading days thus far. This would be the lowest amount of volatility on record. It has been a slow and steady rise over the course of the first 3 quarters. This is in spite of the last few months experiencing major weather events, plenty of North Korean missiles to go around, and the prolonging of a stalemate in our Nations Capitol. Usually, I would be penning at least one update a year to explain the volatility that surrounds these types of events and the normalcy when they occur. However, the need for that message never arose as the slow and steady trend continues. So, to my next point:
So what gives? When you look at the underlying economic data, there is an argument that we are in somewhat of an "optimal" environment for stock growth. Low interest rates, low(er) commodity prices, minimal inflation and continued optimism from consumers has propelled this bull market through its 9th year. There is still plenty of hope priced into stock prices that the economic growth agenda of the White House eventually gets moved through. The short-term resolution to the ever-looming debt ceiling deadline was a small boost to stock prices and perception towards Washington D.C. There still seems to be a tiny glimmer of hope that bi-partisanship lives. Tax-reform would most certainly be a positive for the stock market and businesses in general, but we are far from a deal getting done. Global economies are becoming somewhat synchronized in their recoveries and growth. Again, this serves as another tailwind for global stock prices. These tailwinds have seemingly been strong enough to shrug off things like North Korea and other geopolitical threats.
Moving forward: Hindsight gives us the benefit of understanding what causes severe market declines, economic depressions and recessions and helps us improve the system in an effort to reduce the probability of making mistakes twice. Unfortunately it gives us little information or insight about what could derail the economy or markets next. My point in mentioning this is the fact that we as investors can be lulled to sleep by such "goldilocks" environments and continued positive performance. The human brain after experiencing an event in repetition, like several years of stock market appreciation, is programmed to expect the event or behavior to continue. It's just how we think. So while we continue to enjoy and benefit from the positive performance, we cannot ignore or forget the fact that the next correction or significant decline can be anywhere on the horizon for any particular reason. It is times like these when we are fighting our own instincts that sticking to basic principles of diversification and having reserves are more important than ever.
What we are doing: I successfully passed my CFP ® exam and have now earned the right to use the marks behind my name. It is a great feeling to have both advisors in our office be Certified Financial Planners. Eric and I recently traveled to New York for the day to meet with one of the investment firms with whom we partner. We were able to speak firsthand with the Chief Investment Officer's of a trillion dollar firm to learn more about their process, and how they see the investment landscape moving forward. Its also worth noting, former Chair of the Federal Reserve Ben Bernanke spoke to us and gave his point of view on the current Economic landscape. We relished the opportunity to hear from this unique perspective on dynamic subjects like the economy and monetary policy, but also to re-affirm our confidence in the investment managers we choose to partner with. We have recently teamed with a new Office of Supervisory Jurisdiction (OSJ, long for compliance and oversight) which we feel will help streamline our operations and ensures best practices for us as an office. We have joined 180 other financial advisors under this new OSJ office which gives us another network of colleagues to learn from and continually improve. Our annual "How We Do It" event will also be coming up in November. Be sure to look out for an invitation to this event in the coming weeks. It is a great opportunity to meet and spend time with your team and get a behind the scenes look at the improvements we make each year how and we do what we do every day.
As we move forward towards the end of the year, we more than anyone hope this "goldilocks" environment continues. We continue to anchor our investment management with prudence and diligence as we look at the market and the economic environment. Our staff is committed to your success. As always, if your situation has changed in anyway please let us know.
For continued health and prosperity.
Robert S. Jeter II, CFP®, CRPC®