Category

America

Is history repeating itself? Market declines continue.

Is history repeating itself? Are we in the midst of another Great Recession?

The last three weeks have been intense in the stock market. On Thursday, March 12 and Monday, March 16, we’ve seen drastic declines. It’s difficult to see the silver lining in the market when the headlines are just as terrifying as the unknown of our investment returns. We haven’t seen the markets act in this manner since 2008-09.

Are we repeating history, and at the start of a recession? The short answer: no. Let’s talk about why …

To begin, I don’t think I could write a comparison better than the one USA TODAY published last week: https://www.usatoday.com/story/money/2020/03/11/recession-heres-how-coronavirus-crises-different-2008/5012228002/

If you read their article and still want my perspective, read on!

As financial advisors, we look to different measurements to gain insight as to what the future of our economy and the market may hold. Without boring you with an economics lesson, I would like to give an overview of just two of them: gross domestic product (GDP) and the consumer price index (CPI).

With respect to our country’s GDP, consumer spending is its key driver. If we look at how the stock market ended in 2018, we were down about 20 percent. Therefore, it must mean a recession followed, right? Fortunately for everyone, that was not the case as we saw tremendous returns in 2019.

So how did the stock market get it wrong? We knew the noise of daily news was causing concerns of trade wars and a government shutdown to investors. In times of uncertainty, volatility increases. Despite the everyday investor seeing significant losses in their investment accounts, Christmas-time consumer spending was up 19 percent from the previous year! This shows us that drastic changes in the market did not translate to drastic changes in consumer behavior. Our country’s current GDP is more than 2 percent. Until we hit GDP of 1 percent, I am confident with our country’s growth.

Another key factor is understanding the CPI. If you look at the chart below from the Bureau of Labor Statistics, you can see that once the CPI reaches 4 percent, a recession is quickly on the horizon. The CPI is currently in the mid to low twos. We haven’t reached the threshold and we shouldn’t assume the coronavirus is a catalyst for a recession.


*Source: Bureau of Labor Statistics

Health care providers, scientists, and the leaders of our communities are working diligently on preventative measures and access to care for the well-being of all. There is not a country more well equipped than America. Hysteria, uncertainty, and volatility will pass. It always does, and once that happens, our country’s strong economic fundamentals will be restored just like they always do.

If you gain one takeaway from this: stay the course. What if in December 2018, you decided to get out of the market for fear of the negative markets to continue? You would have missed out on the positive returns that followed. While this uncertainty is uncomfortable, please stay safe and please choose to be hopeful.

About Megan:
Megan Rightnowar got into the financial services business almost five years ago to help individuals and families create a plan for financial freedom. She believes that money doesn’t have to control your life and she helps people live that out.  As an extension of her love for educating clients, she enjoys writing blog posts covering a myriad of financial topics. Megan also teaches finance and personal planning for pharmacy students at the University of Toledo.

*Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future results.

Securities and investment services offered through Royal Alliance Associates, Inc. (RAA), member FINRA/SIPC. RAA is separately owned and other entities and/or marketing names, products or services referenced here are independent of RAA.

America the Beautiful

Sean Savage

The Fourth of July is a natural date to reflect on our nation’s founding 243 years ago in 1776. The signing of the Declaration of Independence began an experiment which has unleashed freedoms and prosperity unparalleled in human history. The excerpt from the Declaration of Independence which I believe captures the essence of this experiment is:

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”

I am in the process of reading the book, Thomas Jefferson: The Art of Power, written by Jon Meacham. The book provides wonderful insight into the fragility of our founding and the severe threats faced by the founding fathers to get to July 4th, 1776. Our foundation as a country is strong, but I believe our democracy will always be fragile and—like a special family heirloom passed down generation to generation—worth preserving for future generations.

I sometimes write after a drop in the stock market and address underlying economic concerns and anxiety. However, today I write as our economy just crossed a milestone with the longest economic expansion (over 10 years) on record going back to at least 1854, unemployment at historic lows, and the S&P 500 at or near record highs. Things are not perfect as there are always concerns, risks, and threats, but I am thankful to live in this country and participate in an economic system which was spawned by the Declaration of Independence back in 1776.

I feel fortunate to be in this great land. My dad routinely said, “We all drink from wells we did not dig.” There is no truer statement as we look back to the founding of this great country. I am thankful to be working with and serving my clients.

For all who are struggling this holiday with health or other challenges, may you find comfort and peace. I wish you all a very blessed 4th of July holiday surrounded by those you love. May the fireworks remind all of us that America is truly beautiful.

Font Resize
Contrast