Growth We Have Longed For

Written by: Michelle Smalenberger, CFP®

This week has proven to be another exciting week in the financial markets!  As of recently, it seems things have calmed and quieted a bit in the political arena compared to the protesting we grew immune to following the presidential election.  After a couple of years of stagnant growth in the markets and in our economy, it is a very exciting time to finally see the growth we have longed for.  The markets are performing very well due to strong reported earnings by a majority of companies across many sectors and industries.

There has been so much uncertainty regarding the direction of leadership for the country which has really stalled the market from moving forward.  Remember, the markets are forward-looking.  When there is potential uncertainty ahead, with no clear indication of where we are moving, it can stall everything.

How many of us take that trip when you aren’t sure you can afford it?  How many people shop when they aren’t sure they will keep their job to pay for those things?  We all need certainty at some level.  There is a refreshing air that comes with knowing which direction things are moving, for at least the foreseeable future.  This does not mean we will all like the things that are decided, but it does provide direction.  And with that you can either decide to get on board, sit it out, or change course.

This is also an exciting time for many Americans to see their portfolio investments grow.  This growth provides assurance that the companies, which drive our economy, are worth investing in and buying products and services from.  Some of the fear that crept in since the market drops of 2007 and 2008 has been relieved.  However, retail investors are still holding sizable positions in cash.  The economy and our country’s leadership have much work to do in order to bring more money off the sidelines.

In case you find yourself growing impatient, I want to point you back to a previous interview that the Speaker of the House, Paul Ryan, provided: https://m.youtube.com/watch?v=41HQgEKeIzw in which he noted a prioritized order for the actions planned with our new administration.

Specific priorities noted:

Regularly Reform

Affordable Care Act Relief

Border Security

Budget and Tax Reform

There are plenty of things to watch for throughout this year that can help fuel companies to further growth.  We will be sharing about these in the days ahead.  It is important to be careful of thinking that things aren’t moving fast enough.  There is an order and reason for the timing of when various reforms deserve attention.
We are looking to see what the Fed decides as far as raising interest rates in March.  This week they will be looking for signs of strength in wage growth and also watching inflation data carefully.  There can be a danger in the Fed continuing to wait, when their opportunity is available now.  If they decide to raise rates, it may cause a bit of a contraction, or pull back in the market, from what we have been experiencing.  However, rarely does the market move straight up.  This could provide a time for anyone still sitting on the sidelines to jump back in.

People tend to get concerned when they hear that interest rates will be rising.  While this may increase the cost to borrow money, it also provides us the ability to earn a higher rate of interest on instruments like our bank savings accounts and CDs.  Over time, we also hope to be able to replenish the bonds that are being called or are currently priced at a premium for the interest rate they offer.  For now, we wait with anticipation that these things will return.

We want to remind you that investing should be for the long-term.  Even though there are short-term news stories and surprises, it is important to build a portfolio that can withstand a longer term time horizon.

These are all good signs of a growing economy!  Over the coming weeks we will continue to provide you with updates that affect your portfolio so you can be assured we are paying attention.