We have been asked a lot about how we think the Iowa caucuses will turn out since we know politics can affect the markets. We will wrap up this episode with each of us giving our own different predictions. We would love to hear yours so be sure to comment below.
Negative Interest Rates
The Bank of Japan on Friday lowered their interest rates. Now both Europe and Japan are in negative interest rates. So why did the US markets shoot up? We believe investors are hoping the Federal Reserve will come back and lower interest rates also.
As you can see on this chart below 23% of the world’s GDP are in negative interest rates. Yet the market still shot up. This is a case where bad news becomes good news as banks around the world are in a sense, giving out free money. That can be good for the markets but bad for the world economy and GDP.
How does that impact your portfolio?
When the markets rallied on Friday we saw equities rise which could be telling us that we will be seeing lower interest rates for a longer period of time. When international economies are in negative interest rates, this in effect is tightening interest rates here, and doing the Fed’s job for them.
Why we are not moving into the equity market now
Many clients are asking this question. Part of the reason is because we are in a bear market and it is this kind of market that you sell into not buy. This is part of the strategy we use in a bear market.
When you look at the US Real Gross Domestic Product, we saw a revision down from the fourth quarter. There was an expected growth of 1.9% but it came in as 1.7%. The energy sector has been down now for about 18 months and we are beginning to see this leak into other sectors like shipping. To counter this is the consumer data which came in good.
There are three micro trends that are still giving the market some psychological
headwind.
- People are not buying as much on credit
- Our aging population that tends to save more
- Home prices are much higher which people look to for confidence
Conversely, even though gas prices are down and people have more money in their pockets, if their neighbor is in the energy business and just lost their job or they can’t sell their house, the psychological impact is great.
The worst January since 2009
We have not seen this bad of a January since 2009. The S&P 500 was down 5.1%, the Dow was down 5.5% and the NASDQ was down 7.9%. On the positive side personal income has reported up. This is a good sign as over the last few years income has not gone up with the positive job numbers. Consumer spending has also been ticking up. This makes us look forward to the jobs numbers coming out this Friday.
We vary on our Iowa caucuses predictions
Ashley Page’s Iowa caucusus predictions
Republicans:
- Donald Trump
- Ted Cruz
- Marco Rubio
Democrats: Bernie Sanders
Bobby Norman’s Iowa caucusus predictions
Republicans:
- Donald Trump
- Ted Cruz/Marco Rubio
Democrats: Hillary Clinton
Trey Booth’s Iowa caucusus predictions
Republican:
- Ted Cruz
- Donald Trump
- Rand Paul
Democrats: Bernie Sanders
Greg Powell’s Iowa caucusus prediction
Republicans:
- Donald Trump
- Ted Cruz
- Marco Rubio
Democrats: Bernie Sanders
We will keep you updated on how this election year could impact you and economy. Please let us know what you think.
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Greg Powell, CIMA
President/CEO
Wealth Consultant
Email Greg Powell here
Ashley Page, JD, MBA
Senior Vice President
Wealth Consultant
Email Ashley Page here
Bobby Norman, CFP®
Vice President
Wealth Consultant
Email Bobby Norman here
Trey Booth, CFA®
Vice President
Wealth Consultant
Email Trey Booth 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.
No strategy can ensure success or protect against a loss
Stock investing involves risk including potential loss of principal.
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.
No strategy can ensure success or protect against a loss
Stock investing involves risk including potential loss of principal.
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