People who view Jan. 1 as an arbitrary date ignore scientific data. Of course, there’s a lot of that going around. Days get longer and sunlight increases as seasons change. While our modern gear disconnects us from nature, in the long run we are cavemen in blue jeans or flip flops, take your pick. The Roman god Janus faced forward and backward, so it makes sense centuries later to make plans for the new year while reviewing the previous year.
Qualitative easing (QE) is a theory masquerading as policy where a central bank, like the Federal Reserve, increases the money supply by purchasing risky assets and replaces them with government debt. Interestingly, many QE critics posing as deficit hawks lost interest in fiscal restraint when faced with current budget deficits. As quantitative easing was theoretical so is quantitative tightening where the Federal Reserve reverses course. It remains an unknown how the Federal Reserve’s policy of ending qualitative easing coupled with rising interest rates will affect the economy.
Some believe a declining stock market portends a recession. Paul Samuelson, America’s first Noble Prize in Economics winner, once joked that markets correctly predicted nine of the last five recessions. Watching your 401K lose value hurts more than watching it go up makes you feel good. Again, blame science, it’s how our brains evolved. After the market’s recent decline, the S&P 500 hangs out where it was during the summer of 2017. Professionally speaking, timing the market is a skill many boast, but few master. A better strategy is to have your portfolio aligned, so market fluctuations don’t cause adjustments to your living standards.
The United States’ current 3 percent economic growth will almost assuredly be lower next year, but all signs point to modest growth, unlike Europe and China’s declining economies. Even though clouds loom on the horizon, the United States’ economy remains the world’s safest harbor. Our recent tax cuts and resulting budget deficits will have to be addressed sometime down the road. A solution is over my pay grade, but it seems more practical to address sooner rather than later. The United States has the world’s reserve currency, which is a Get Out of Jail Free card, economically speaking, but you can’t ignore math. The resignation of a decorated Marine general serving as defense secretary belies a chaotic administration and puts us in uncharted waters.
Just before his death, Paul Samuelson blamed The Great Recession on “Milton Freidman-Freidrich Hayek libertarian laissez-faire capitalism permitted to run wild without regulation. Both of these men are dead, but their poisoned legacies live on.” For sustainable growth, we need a middle ground with prudent regulations that don’t inhibit progress. It doesn’t take a Noble Prize winner to know it’s a good protocol for a happy and prosperous New Year, every year.
You can’t always get what you want but Buz Livingston, CFP can help you figure out what you need. For specific advice, visit livingstonfinancial.net or drop by 2050 West County Highway 30A, M1 Suite 230.