Looking at the second half of 2016
After the July 4th festivities we remind you that we have just passed the first half of the year. There are a lot of issues that could affect your investments that we are watching closely.
- The presidential election: As November draws near, the candidates will increase their “verbage” and the markets may react. Which candidate will be better for the markets? We do not know yet. We don’t know the policies of each candidate, especially with Donald Trump.
- The Brexit: The uncertainty with the Brexit will continue which hurts business confidence. Several European central banks may initiate some quantitative easing which potentially could drive the markets up.
- The Fed: We still have an accommodative Fed which we believe will stay on the sidelines until later this year.
- Jobs and GDP numbers: We are seeing improving jobs numbers and GDP. We are hoping that when the second quarter numbers are revealed that we will see growth in these areas.
- Consumer confidence and consumer spending: This is trending up and it is very important since consumer spending is 70% of our economy. We need this to continue to rise.
- Oil: Investors need to watch oil as our markets trade in line with it. If oil goes up, so does our markets.
- Housing: It will continue to be a catalyst for our markets and economy. It has been this for the past two years.
- Earnings: We need to see earnings rise and take us out of a corporate profit recession. With expectations so low, hopefully we will get some good surprises.
What was to be the big news item concerning the Fed possibly raising interest rates has been push to the back burner by the Brexit. Surprisingly, there are positive Brexit results in the US from what was at first viewed as all negative. The Brexit has pushed down the likelihood of the Fed increasing interest rates to 12%. The markets sold off after the Brexit vote but since then, they have rallied back somewhat. Bond yields have gone lower, gold has continued to go up, and we are seeing that money from around the world is flowing to the US. We have said for a long time that the United States is like the best house in a bad neighborhood. It’s still the best place to keep your money.
The shock value of the Brexit vote has now past and reality is settling in. The Central Bank of England is cutting interest rates back which will put about $199 billion US dollars back into the economy. Britain’s Treasury Secretary has also cut corporate tax rates down to 15%. They are trying to spur investments. We believe Britain is trying to pair these to actions together to create a positive Brexit result from what might have been a negative situation. If England brings their rates down, this also puts pressure on our Fed to keep our rates where they are.
We feel like we have several positive things going on in the markets. Of course, there are some negative issues out there as well and we are watching those. Please let us know your thoughts.
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Bobby Norman, CFP®, AIF®
Senior Vice President
Email Bobby Norman 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.
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