Our political prediction
The big discussion this morning in our Portfolio Team meeting was about our prediction last week that we were about to see some nasty political tension in DC. Well, it has started. Last week Speaker of the House, John Boehner, resigned from his office. We predicted Boehner could possibly be voted out but he must have had the same source we did as he decided to beat the vote.
The political dynamics in Washington
The Speaker’s resignation totally changed the dynamics of politics in Washington DC. When 30 or so Republicans in the House were rumored to put Boehner up for a vote, everyone thought this would push him to become more conservative on the debt ceiling and government shutdown. Boehner got ahead of this by announcing his own resignation and removing that conservative pressure. This could allow him to work more with the Democrats and push towards a resolution for the pending shutdown.
Risk in your portfolio created by politics
Whenever the government starts to debate on a debt ceiling or a government shutdown, it creates an uneasiness in the markets and ultimately risk in your portfolio. By stepping down as the Speaker of the House, John Boehner may have essentially pushed that discussion down the road until after he is officially out of office.
More political tension in December
Boehner’s resignation is only a band-aid on the problem as his resignation will be official in a few weeks. Boehner has been working towards meeting in the middle with Democrats, but now the new Speaker of the House will have to fight harder on the Republican side. This means we will see more heated political debates in the first two weeks of December that could cause market volatility and ultimately risk in your portfolio.
We have also been predicting the problem of deflation, no interest rate hike this year and lower oil prices. So far we have been ahead of the news media on these predictions and these issues could very well have a huge impact on the markets. We will continue to bring our research findings to you.
Where we see growth opportunities
While the economy is showing signs of growth, the markets respond more negatively to political front page news. Aside from the political tension, there are obvious headwinds in this market with global slowdown, especially in China, and the market uncertainty created by the Fed. There are however, areas where we see growth opportunities in the next two weeks. GDP last week was revised up to 3.9% showing that the US economy is on a firm foundation and consumer confidence is up. Where we see growth is in the private sector and the consumer. The mainstream media seems to be ignoring this information in exchange for the political tension in Washington DC.
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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.
Stock investing involves risk including potential loss of principal.