We have mentioned Brexit multiple times in our vlogs over the last few years. It always seems like Brexit is about to happen and then nothing is done, however this week it really appears to be the “move or don’t move” moment. In order to make things happen, Theresa May must pass the Brexit deal through the House of Commons and Europe must agree to the deal or we’re going to hit a time wall where it’s going to be a no deal, hard exit which could negatively impact the already very weak global markets. With Europe near recession, Germany’s negative GDP and Japan in a recession, the last thing global market needs is a hard Brexit decision. People have been saying to our Fed chairperson, Jerome Powell, that there’s no inflation risk because of the global weakness. Our clients have asked us why the Fed is raising rates, why it impacts portfolios and does any of this mean that the economy is weak. The answer is that our economy is still strong. The global weakness and the fact that we’re importing deflation is what is causing the change you’ve been seeing. In December the consumer price index was -0.1%. While that number isn’t at a disaster level, it’s also not long term. You can’t have an inflation problem within an economy that has negative inflation because it’s counterintuitive.
Clients are always asking what the trade war is, why it’s making the market react, and why economic reports coming from China make the market go down. Remember 10 years ago China helped stave off a global depression by enacting a $600 billion dollar stimulus package, which helped us a good bit. It’s also important to know that over the past couple of years China has accounted for over a third of the global economic growth. That’s a big number for one country. From an investment standpoint, in 2017 there were a 111 billion Chinese investments in North America and Europe. Last year that fell by 73% to 30 billion, which is a big drop in investment spending by the Chinese. We’re starting to see the China slowdown impacting great companies, like Apple. The good news within all of this is that China is making moves. Last week China put $34 billion dollars into infrastructure spending. That alone is going to help the market along with the Central Bank acting with more stimulus throughout the year.
We’re now entering the 24th day of the government shutdown. If this continues another week and a half, we will potentially see that the $6 billion dollars estimated cost of the shutdown will exceed the proposed $5.7 billion for the wall. We’ve been asked how this government shutdown will affect markets and portfolios. One thing we want to keep an eye on is consumer confidence and consumer spending when the shutdown ends. There are people, such as government contractors, not getting paid and that along with all the other things surrounding the shutdown, will eventually have a ripple effect and that’s the type of things we are watching closely. To find more information on this topic you can visit the Fi Plan Partners social media platforms such as Facebook, Twitter and LinkedIn to find an article we posted this morning. This article breaks down the logistics of everything that we’re discussing relating to the costs of the shutdown.
Greg Powell, CIMA®
President and CEO
Email Greg Powell here
Bobby Norman, CFP®, AIF®
Senior Vice President
Email Bobby Norman here
Trey Booth, CFA®, AIF®
Senior Vice President
Email Trey Booth here
Associate Vice President
Email Adam Vansant here
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
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