Party like its 1999! Or 1955!
Welcome to the back half of 2019! Market performance in the first half of the year was the best since 1999. The second quarter was driven largely by the market upswing last month which was the best for a June since 1955!
The main driver of these results is the 180 degree pivot at the start of the year by the Federal Reserve from raising rates to suggesting rate cuts. Everybody (and certainly the markets) always loves cheap money – the ability to borrow at historically low rates fuels economic activity and keeps inflation low. When combined with historically low unemployment and a healthy consumer population, the current economic climate remains quite favorable.
This month also marks a milestone for the economy – officially making it the longest recovery (120 months) in U.S. history. Many media reports suggest that this length of time is the very reason that the current economic climate is doomed for a decline. Unlike humans though, economic recoveries don’t die of old age – they die from excess growth and economic imbalances. The current expansion has certainly been nothing to brag about in historic terms with its slow growth rate. In fact, at its current pace, the current run would have to last six more years to match the aggregate growth of 1991-2001 and nine more years to match the growth of 1961-1969. Given that back drop, we believe that the current slow growth economic climate will remain favorable for some time to come. Besides a Federal Reserve well attuned to keeping the party going with low rates, let’s not forget years three (this year) and four (next year) of a Presidential cycle are historically strong as well.
Are there any clouds forming on the horizon that we should pay attention to? Well, certainly the debt load of our government and other countries around the world is most concerning. Unfortunately, politicians don’t seem to want to address such a problem these days – that’s a real issue for future generations! In the more immediate term, the markets are almost expecting a rate cut later this month – beware if that doesn’t happen as the markets will react very strongly!
Regardless of what happens in the immediate future, our advice is the same as it always is – especially when one owns well diversified and balanced investments. Stay consistent and don’t get too caught up in the headlines – be they positive or negative. However, if you know you need a chunk of money for something in the next few months – a trip, a car or college tuition (that bill to Auburn for my oldest son is due next month!) – now is as good a time as any to take it.
Remember, for weekly updates and information, tune into our radio show/podcast. The radio show broadcasts live every Sunday at 9AM on 93.1 FM/540 AM and then debuts on the various social media channels like Facebook https://www.facebook.com/NelsonFinancialPlanning/ and our website https://www.nelsonfinancialplanning.com