Spring 2018

Goldilocks is Gone! The “Goldilocks” economic recovery of not too hot (Slow to moderate growth) and not too cold (Recession) is over. Fri- day January 26, 2018 US jobs reported more than expected wage increases. Global stock markets were rattled: Sharply down for numerous days, followed by market recoveries. This short summary provides commentary on volatility, an- ticipated impacts of U.S. deficit spending and investing. Since the recession recovery began in March 2009, except for a few situations (e.g., BREXIT), the US stock markets have not experienced much volatility. Yet, volatility is more the historical norm than the exception. 5% market drops are historically common, on average every fifteen weeks per comments from Clark Capital Management Group. S&P 500 downs of 10-20% occur once per year on average. Major market downs over 20% occur one in three years (none since the 2007-2009 recession. We think that wage increases, and deficit spending may result in greater market volatility. Besides wage increases, Federal Reserve interest rates are expected to rise, a bell weather for higher rates overall. Since late December 2103, the 10-year Treasury rate has been under 3%. Low rates help: companies get cheaper loans; Individuals and couples get low mortgage rates. The down-side of low interest rates has been little or no return on checking, savings and high-quality bond investing. As rates rise: Corporate growth can be stifled; and, investors may get moderately better bond returns. Recent market volatility is more complex than rising wages, however. The US government is very likely to incur large an- nual debts. The recent tax changes will stimulate (too much growth?) the US economy and very possibly result in US def- icit spending. Then, US House and Senate Republicans and Democrats agreed to a budget deal that would add over $300 billion to the US deficit. Finally, the recent White House 10- year budget makes no attempt to balance spending and taxes. The take-aways: Greater deficits are likely to result in higher interest rates to attract investors. Higher interest rates can lead to slower growth or worse, a recession. Markets have been roiled by wage increases and the probability of more US debt. What are investors to do? Our Firm’s Investing Position: We do not make short-term stock market predictions. Our general advice to investors: Have no stock exposure for money needed for the next 24- 60 months. Those willing to take on modest risk, may only require a two-year period of income protection. For the more skittish investors, protect your income sources longer. For mid and long-term investments, we are positive per the fol- lowing: Almost every country in the developed world has positive economic growth (Per: The Economist); The US is not showing any signs of an economic slowdown, and, inter- est rates remain moderately low. We live in interesting times! Gives us a call if you have ques- tions about this article or pertaining to your personal or busi- ness situation. Travis Flandermeyer, MBA. ............. direct line (505) 717-1111.................................................. Travis@CeteraNetworks.com Phil Messuri, MS, CFP®. .................. direct line (505) 798-6941............................................ Messurip@CeteraNetworks.com 6100 Uptown Blvd NE, Ste 610B/C, Albuquerque, NM 87110....................................... www.DoctorsFinancialResource.com Disclosures: All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. Indices are unmanaged and cannot be invested into directly. Past performance is not indicative of future results. Cetera is under separate ownership from any other named entity. This is part of a series of articles on the business side of medicine from The Doctor’s Financial Resource.