ARBOR WEALTH: Four years of tough economic sledding

Published: Sunday, October 28, 2012 at 03:32 PM.

And, since those whose incomes are considered middle class spend a greater percentage of their income on basic items like fuel and food, their spending power has actually decreased. So Hoisington is essentially saying that the governmental stimuli raised prices on those who could least afford it, and who have seen their real (inflation adjusted) income and savings rate decline.

International trade is experiencing a downturn. And as we all know, the U.S. is linked with the exporting activities of the emerging market countries. Economic isolationism is no longer a practical ethos in the modern global world. 

Our markets have been faring pretty well, though, right? Here, we are required to distinguish between the economy and the stock market, which are two separate considerations, though certainly interrelated and which influence each other significantly.

Those with discretionary income, who have invested in what we call a cyclical bull market within a longer-running bear market, have seen their investments bear fruit.  Naturally, this is good news for investors and good news for our clients. 

The problem is, the long-term investing environment is impacted greatly by the winds of global economic challenges, and the coming four years looks like tough sledding, regardless of which presidential candidate claims victory.

European leaders vacation in late summer, and simply shelve their economic issues in abeyance. As amplified civil unrest rocks Europe, it is clear that the EU has seen little to no resolution. 

Nor has our domestic debt issue been addressed. Neither have the domestic debt issues of countries around the globe. Hoisington writes:  “With this global slump at hand, a highly relevant question is whether the U.S. can escape a severe recession in light of the following: the U.S. manufacturing sector that paced domestic economic growth over the past three years has lapsed into recession real income and the personal saving rate have been slumping in the face of an interim upturn in inflation and aggregate over-indebtedness, which is the dominant negative force in the economy has continued to move upward in concert with flagging economic activity.”

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