5 Critical Money Issues in 2017
Ty J. Young Inc. Editorial
Happy New Year! 2017 here we come! Can these “good hits” just keep on coming?
As 2016 fades into memory, it would be easy to say that “Happy Days” are here again! The stock market roars to new highs virtually every week. The election of Donald Trump appears to have galvanized conservative tax cutters in Congress, promising a stimulative flattening of the tax rates. And regulations appear to be on the chopping block.
But… a rosy picture on the surface still masks significant headwinds for the economy and the market.
There are 5 critical money issues which could affect you, the stock market, and the American economy in 2017:
5. The Fed raising interest rates. In most respects, rate hikes can be a good thing. They are normalizing the interest rate environment from 8 years of government tinkering with the value of our money. But for certain, as rates continue to go up – as Janet Yellen has indicated – it could have a dampening effect on the rising stock market. Yellen has projected at least 2 or more hikes in 2017.
Raising interest rates could:
A) Reverse stock market gains
B) Negatively impact US export businesses
C) Make borrowing a LOT more expensive
4. Black Swan event in geo-politics. Any number of events, known as “Black Swan” events, could lead to an impact on the stock market, the U.S. economy, and in turn, your money. Black swans are bad for markets because they are circumstances that occur unexpectedly and outside of the normal chain of events.
“Black Swans” could include:
A) Euro-zone debt crisis – European governments and banks default on existing debt, which affects American companies tied to their markets.
B) Iranian adventurism – Iran decides to use terror and conflict to undermine our friends in the Middle east, which can affect oil supply and U.S. businesses in the region.
C) Russian expansionism – further conflict in Europe could radically damage markets – since Europe is one of our largest trading partners.
D) South China Sea conflict – almost 70% of ALL global trade passes through these Asian waters. Conflict here would without question impact the global economy.
3. Value of the Dollar Over-heats. A rising dollar is a good thing as it reflects a strong American economy and a strong dollar policy. However, a rising dollar based upon Chinese currency manipulation, or a currency war with other countries, will create economic havoc and great volatility in currency markets.
A rising dollar NOT based on strong market fundamentals could occur due to:
A) Chinese currency manipulation
B) Demand for dollars due to global economic catastrophe
C) Currency wars where competitors are devaluing their currency all at the same time.
2. U.S. debt burden looms over markets. The outgoing administration doubled all U.S. debt—all of it—in 8 years. Adding 10 trillion dollars of debt to the economy without new boats, planes, guns, helicopters, infrastructure – without ANYTHING to show for it, was a huge Keynesian debacle. While the honeymoon period remains on-going for the President-elect, the country cannot afford much more of our deficit filled financing of government operations. At some point, our lenders stop lending. We simply benefit – as the stock market has – from being the only safe game in town.
U.S. debt burden could cause a market contraction, if:
A) We keep borrowing at the current rate;
B) Interest rates skyrocket, making the debt payments more expensive
C) China, Russia, and other adversaries decide to move against the dollar, making it more difficult to finance the debt.
1. Your personal finances may not match stock market success. While the market has been up, that doesn’t mean your own 401K has been so lucky. For example, some energy bets would seem to be a sure thing in the Trump era, yet some utilities such as FPL have dropped significantly since the election. Why? They bet, and invested, in the Obama clean energy agenda, which appears to be on the way out. Political determinants for investing rarely, if ever, go the way you want them to.
Your 401K may not enjoy the market up-swing because:
A) Made the wrong investments
B) Fees paid to broker are too high
C) You structured your portfolio with risk-related assets.
Personal finance has taken a beating since the collapse of 2008. Yes, for many, our 401Ks are back! But do you have more money in your pocket? The same “gurus” who kept you in the market at the 2008 highs are now telling you again to stay in… with the same visible “irrational exuberance” which occurred before the Lehman collapse. Many in the industry are advertising against principal protection investing while at the same time not reminding you of the obvious – their advertising message conflates products and does not offer to give back their fees or your money when they lose it.
There were some not-so-happy moments in 2016 as well. A brutal Presidential election campaign, foreign policy setbacks…while the market skyrocketed, real people faced real issues that were a challenge for us all.
Despite those problems, most look at the record for 2016 and consider it a good one for the markets and money in the USA. But headwinds remain for the individual investor and the American economy. The time may be right to move some of your portfolio to principal protection products.
Our advisors are experts in helping people protect and grow their money. Call today to learn more, 877-912-1919.