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2020 Economic Update

There are a lot of questions surrounding how well the U.S. economy is doing and how the economic outlook will affect you and your financial future. When you turn on the television, the media will tell you our current economic state is horrible, and we should all be concerned. But is that reality, or is it what I like to call media-induced uncertainty?

When we look at the numbers, we can see that the economy is doing well, and we predict it will continue to stay strong through the coming periods. The U.S. consumer is fueling the economy. We’re seeing low interest rates on mortgages (under 4%), moderate gas prices, controlled inflation, and high unemployment. As a result, GDP and jobs are doing well.

The current GDP is steady and on target at 2.1% and doesn’t appear to be slowing down any time soon. Two million new jobs were created in 2019, and America experienced full employment for most of the year. Unemployment held steady at 3.5% and wages increased by 3.3%, exceeding inflation.

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While these numbers are encouraging, the federal government continues to keep a very close eye on the economy. Yes, earnings exceeded expectations last year, but businesses and corporations are setting their expectations low. Growth in the economy is slowing down, compared to the incredible growth we saw following the recession. We believe this is simply because there’s not as much momentum and there isn’t room for more growth.

Another factor we’re keeping a close eye on is how the political climate will affect the economy, both globally and within the U.S. China is currently experiencing a recession, and their economic outlook continues to decline due to the current coronavirus epidemic. We’re also seeing geopolitical tensions in the Middle East, specifically with Iran, and it’s unclear how that situation will unfold in the coming months.

Within our own borders, it’s election season. As a handful of candidates are currently fighting to claim the Democratic endorsement, we can see that history will most likely repeat itself. Elections usually have somewhat of a negative effect on the economy. Fear equals votes, and fear typically leads to tremendous volatility within the market.

Economists say there’s a 25% chance of an impending recession, but that’s not surprising. Recessions happen—it’s how our economy works. We don’t know when it will come, but there’s certainty it will eventually. For the time being, we’re choosing to see the glass half full. A 25% chance of recession also means a 75% probability of growth.

Making investment decisions in uncertain times can feel intimidating, but it doesn’t have to be. Historically, the market always rebounds. Our advice to you: stick to your plan and stay in your long-term lane. Make decisions based on a company’s financial information, not on the media’s current headlines, and avoid emotional decisions. Select a wide range of investment options for your portfolio. Diversify, diversify, diversify. And monitor your portfolio regularly, because no company is guaranteed good performance.

We can help you navigate the twists and turns of our uncertain economy and market, helping to distill truth from the noise and ensure the security of your financial future. Please contact us to schedule an initial conversation. We also periodically offer economic outlook webinars. Click here to be invited to future webinars.

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