US Economy Update with St. Germain Investments | Connecting Point | Oct. 3, 2019

US Economy Update with St. Germain Investments | Connecting Point | Oct. 3, 2019


UNEMPLOYMENT IS LOW AND CONSUMER
SPENDING IS UP AND THERE 3 IS NO TRADE DEAL WITH CHINA. WE SAT DOWN WITH THE. HAVE AND PORTFOLIO MANAGER TO
TAKE A LOOK AT THE NUMBERS AND OFFER ANALYSIS AND CONTEXT
RECORDING THE ROAD AHEAD. AND THEY ARE A SPONSOR OF WGBY’S
MURRAH GALLO EVENT.>>THERE ARE CERTAINLY STORM
CLOUDS THAT ARE GATHERING THAT HAVE US CONCERNED. I THINK THERE’S NUMBER OF THINGS
THAT WE CAN TALK ABOUT THAT POTENTIALLY COULD PUSH US IN A
RECESSION, SO AS INVESTORS, IT IS SOMETHING WE’RE CONSTANTLY
MONITORING AND THINKING ABOUT AND, YOU KNOW, ASKING OURSELVES,
DO WE NEED TO MAKE CHANGES TO PORTFOLIOS IN RESPONSE OF THAT
IN ANTICIPATING THIS IN SOME WAY.>>IT CERTAINLY IS A POLITICAL
ISSUIX OF COURSE. THE WHITE HOUSE SAYS NO, NO, THE
ECONOMY IS STRONG, DEMOCRATS AND OF COURSE WE’RE TALKING ABOUT AN
ELECTION COMING UP, SAYING NO, WE’RE ABSOLUTELY HEADING IN THAT
AREA. IT BECOME AS VERY BIG POLITICAL
THING AND THAT MAKES PEOPLE NERVOUS AND I’M SURE SOME OF
YOUR CLIENTS ARE IN THAT POSITION.>>IT SEEMS EVERYTHING THESE
DAYS ARE IN THE POLITICAL ARENA SO DEPENDING WHICH CAMP YOU’RE
ON, YOU WILL HAVE A DIFFERENT PERSPECTIVE OF WHERE THE ECONOMY
IS HEADING. AS INVESTOR WES WE TRY TO FELL
TER OUT THE DATA AND FILTER OUT THE NOISE AS A DISTRACTION. THE MAIN DRIVE NOW IS THE TRADE
WAR BETWEEN THE U.S. AND CHINA. THE U.S. IS THE LARGEST ECONOMY
IN THE WORLD, CHINA IS NUMBER TWO. WHEN TWO BIG ECONOMIES ARE
HAVING A TRADE DISPUTE, THIS DOES IMPACT THE GLOBAL ECONOMY. WE’RE SEEING EVIDENCE OF STRAIN
IN THE GLOBAL ECONOMY IN AREAS THAT ARE MORE EXPOSED TO TRADE
AND GLOBALLY, IF WE WIDEN OUR LENS OUTSIDE OF THE UNITED
STATES COUNTRY THAT IS ARE MORE EXPOSED TO TRADE ARE REALLY
STARTING TO SHOW SOME SIGNS OF STRESS. A COUPLE GOOD EXAMPLES WOULD BE
GERMANY AND SOUTH KOREA. THOSE ARE TWO QUESTIONS THAT ARE
TRADE DRIVEN, HE EXPORT DRIVEN AND THEY’RE FEELING THE WAR
DIRECTLY. THE UNITED STATES IS IN A UNIQUE
POSITION IS THE ECONOMY VERY LARGE AND TRADE IS VERY POUND TO
OUR ECONOMY BUT IT IS LESS IMPORTANT TO US THAN OTHER
COUNTRIES SO IN SOME WAYS, WE’VE BEEN ABLE TO MITIGATE THE
IMPACTS OF THE TRADE WAR BECAUSE WE’RE NOT AS RELIABILITY AS
OTHER COUNTRIES ARE ON TRADE. WHERE WE’RE SEEING IT RIGHT NOW
DOMESTICALLY IS IN THE MANUFACTURING SPACE. GLOBALLY, THE MANUFACTURING
WORLD CONTRACTING BECAUSE MANUFACTURING IS TIED TO TRADE. MANUFACTURING, THIS IS NOT THE
U.S. ECONOMY OF A HUNDRED YEARS AGO, MANUFACTURING IS NOT A REAL
LARGE PART OF THE ECONOMY ANY MORE, IT IS 12 OR 13% OF OUR
ECONOMY IS BASED ON MANUFACTURING. SO WITH MANUFACTURING SLOWING
DOWN AND CONTRACTING IN SOME WAYS THAT DOESN’T NECESSARILY
HAVE THE SPILLOVER EFFECT OF THE BROADER ECONOMY THAT IT WOULD
HAVE, SAY CERTAINLY 100 YEARS AGO OR 50-YEARS AGO OR EVEN 20
YEARS AGO IN SOME RESPECTS.>>WHAT IS THE IMPACT IF THERE
IS NOT A DEAL REACHED BY DECEMBER?>>IT IS A DARK CLOUD OVER
HANGING MARKETS RIGHT NOW. IT ESSENTIALLY CREATED A LOT OF
UNCERTAINTY AND SO JUST PUT YOURSELF IN THE ROLE OF, YOU
KNOW, CFO OF MAJOR COMPANY, YOU DON’T REALLY KNOW WHEN THIS IS
GOING TO BE RESOLVED. SO THAT MIGHT DELAY, YOU KNOW,
NEW INVESTMENT IN GNAW NEW PR NEW EQUIPMENT, SO THESE TYPE OF
THINGS, THE CLOUD OF UNCERTAINTY IS
IS IMPACTING MARKETS, AS WELL. GETTING A RESOLUTION IN THE
TRADE SITUATION WOULD ALLEVIATE THAT CONCERN AND HOPEFULLY, YOU
KNOW, SOME OF THE IMPACT WE’RE SEEING IN MANUFACTURING AND
TRADE WOULD REBOUND AND THE ECONOMY WOULD OVER ALL REBOUND
WITH IT BUT I WOULDN’T ANTICIPATE A DEAL BEING DONE IN
THE TRADE WAR TESTIMONY SEEMS FROM WHAT I’M READING AND
TALKING WITH OTHER PROFESSIONALT SEEMS LIKE IT IS LIKELY WITH US
FOR SOME TIME. THERE CONTINUES TO BE HE ESCAN
WITH THE U.S. RAISING TARIFFSES. YOU CONSIDER IT A TAX IN SOME
WAYS, IT ESSENTIALLY RAISES COSTS AND SOMEBODY HAS TO PAY
THOSE INCREASED COSTS SO WHETHER IT IS THE COMPANIES IMPORTS THE
GOODS OR IF THEY ARE ABLE TO PASS THAT ON TO THE CONSUMER,
RAISING CONSUMER PRICES.>>UP UNTIL NOW HAVE CONSUMERS
REALLY FELT IT? CONSUMER SPENDING IS UP, ON THE
FLIP SIDE, AND IF THIS CONTINUES INTO 2020, AS A HOT OF PEOPLE
HAVE SAID, WHEN WILL CONSUMERS START TO SAY ENOUGH IS ENOUGH.>>NOT TO FOCUS TOO MUCH ON THE
CLOUDS OUT THERE BECAUSE THERE IS A LOT OF GOOD THINGS GOING
ON. THE UNEMPLOYMENT RATE IS 3.67%. YOU HAVE TO GO BACK TO THE LATE
60S TO SEE A COMPARABLE UNEMPLOYMENT RATE. THIS IS BRINGING PEOPLE BACK
INTO THE LABOR FORCE SO MAYBE PEOPLE DROPPED OUT OF THE LABOR
POOL BECAUSE THEY WERE FRUSTRATED THEY COULDN’T FIND A
JOB ARE STARTING TO GET BACK INTO THE LABOR FORCE, SO THESE
ARE ALL GOOD THINGS.>>IN THE MIDST OF ALL, THIS THE
FEDS CUT THE RATES NOT AS MUCH AS THE WHITE HOUSE WANTED. WHAT DO YOU ADVISE OR HOW DO YOU
ADVISE YOUR CUSTOMERS AS FAR AS INVESTING, I MEAN DO THEY STAY
THE COURSE? BECAUSE THIS IS POLITICS AND
THIS IS A CYCLE.>>YEAH, SO A FEW THINGS THERE. WHEN INTEREST RATES MOVE DOWN
WISH THEY HAVE, THERE’S SOME GOOD WITH IT AND THERE’S SOME
BAD WITH IT. I GUESS I’LL START WITH THE BAD
IN THAT IT, YOU KNOW, IT DOES LOWER SAVING ACCOUNT RATES, CD
RATES, SO THERE IS LESS SAFE INCOME AVAILABLE THAT WAS
GENERATED A YEAR AGO OR SO. ON THE FLIP SIDE, IT DEFINITELY
HAS POSITIVE EFFECTS IN THAT IT LOWERS INTEREST BURDEN SO
MORTGAGE RATES HAVE REALLY COME DOWN QUITE A BIT OVER THE LAST,
KNOW, ABOUT A YEAR AGO, WE WERE APPROACHING ALMOST 5% ON 30-YEAR
FIXED MORTGAGES. TODAY WE’RE ABOUT 3.7, 3.75 ON
AVERAGE. THAT’S A PRETTY BIG DROP OVER 1%
DROP IN LESS THAN A YEAR AND TO KIND OF NAUGHT IN BROADER
PERSPECTIVE IN TERMS OF WHAT THAT MEANS FOR DOLLARS, IF YOU
WERE BUYING A $200,000 HOUSE, PUTTING 20% DOWN THAT 1% DROP IN
MORTGAGE RATES WE’VE HAD EVEN LARGER BUT 1% DROP THAT LEAVES
WITH YOU WITH A LITTLE MORE THAN $1,100 EXTRA IN YOUR POCKET EACH
YEAR VERDICTDUCTION IN RATES DEFINITELY HAS IN MORTGAGE RATES
HAS A NICE IMPACT IN TERMS OF HOUSING, PEOPLE HAVING MORE
MONEY TO SAVE IT, INVEST IT OR CONSUME PRODUCTS. AND WE SHOULD SEE A BOOST IN
HOUSING IN RESPONSE TO THAT IN TERMS OF INVESTING IN
PORTFOLIOS, WITH THIS TYPE OF ENVIRONMENT, THE BIGGEST THING
TO KEEP IN MIND IS THAT IT IS, I WOULD SAY, EXTREMELY DIFFICULT
IF NOT IMPOSSIBLE TO DO TWO THINGS. YOU HAVE I HAVE A GOT TO GET TWO
THINGS RIGHT. ONE APPRECIATE DISTRICT THE
RESECTION IS COMING, PREDICT THE TEAMING OF IT.
AND TWO PREDICT THE MARKET REACTION TO THAT. I MANY, YOU KNOW, YOU COULD KNOW
WHAT IS GOING TO HAPPEN AND NOT KNOW HOW THE MARKET IS FOG REACT
TO IT.>>RIGHT.>>SOMETIMES MARKETS CAN
SURPRISE YOU. I THINK A GOOD EXAMPLE TO KIND
OF REMIND US OF THAT IS THE ELECTION OF PRESIDENT TRUMP IN
2016, AS I’M SURE WE ALL RECALL, IT WAS NEARLY CONSIST VIEW BY
BOTH THE PRESS AND MARKETS THAT IT WAS GOING TO BE A PRESIDENT
HILLARY CLINTON, AND GENERALLY SPEAKING, IT WAS A BIG SURPRISE
ELECTION NIGHT, PRESIDENT TRUMP WON, AND GENERALLY SPEAKING,
MARKETS DON’T LIKE TO BE SURPRISED LIKE THAT. AND IF YOU REMEMBER THAT NIGHT,
THEY ACTUALLY, THE FUTURES WERE INDICATING THE MARKET WAS GOING
TO REALLY PLUMMET, BUT ACTUALLY, WE CLOSED UP THE FOLLOWING DAY
AND THEN WE WERE OFF AND RUNNING FOR A LITTLE WHILE, WHICH WAS A
BIG SURPRISE. IT IS JUST A LESSON THERE THAT
PREDICTING THE FUTURE IS A VERY DIFFICULT THING TO, DO AND I
WOULD SAY IN SOME RESPECTS IT IS PROBABLY IMPOSSIBLE SO IT REALLY
DOES PAY TO STICK TO A SOUND FINANCIAL PLAN, HAVE A LONG-TERM
GOAL IN MIND WHATEVER YOU’RE INVESTING FOR AND REALLY DO YOUR
BEST TO STICK WITH IT I WOULD ALSO SAY, YOU DON’T WANT TO
OVERREACT TO NEAR TERM NOISE, THINGS ARE GOING TO COME UP THAT
ARE GOING TO BE UNSETTLING, MARKETS ARE GOING TO GYRATE. OVERREACTING, TYPICALLY, DOES
NOT WORK OUT FOR PEOPLE OVER THE LONG RUN SO IT REALLY DOES PAY
TO KEEP IN MIND WHAT YOUR LONG-TERM FOALS AND TRY TO
REMIND YOURSELF OF THAT, YOU KNOW, DURING TOUGH PERIODS.>>AND STAY THE COURSE.>>AND STAY THE COURSE AS BEST
YOU CAN. THAT’S NOT TO SAYING YOU
SHOULDN’T LOOK AT YOUR INVESTMENTS AND LOOK AT YOUR
OVER ALL RISKS LEVEL OF YOUR INVESTMENTS. YOU SHOULD CHECK IN ON YOUR
INVESTMENTS AND NOT EVERY DAY, BUT AT LEAST ONCE A YEAR IT IS A
GOOD IDEA TO TAKE A LOOK AT YOUR INVESTMENTS AND SEE WHAT YOUR
GOALS ARE, MAKE SURE THAT EVERYTHING IS IN SINK SINK IN
TERMS OF HOW YOU’RE INVESTED WHAT YOUR GOALS ARE. HE WOULD REMIND PEOPLE, THE
SYSTEM CAN BE VOLATILE. THE AVERAGE PERSON THROUGHOUT
SHOULD NOT PROBABLY ALL BE INVESTED IN THE SYSTEM BECAUSE
THINGS HAPPEN IN LIFE. IT COMES DOWN THE TIME LINE, AS
WELL. IF YOU KNOW YOU NEED FUNDS, YOU
HAVE A FUND FOR A WEDDING OR HOUSE DOWN PAYMENT OR WHATEVER
THE CASE MAY BE, WITHIN THE NEXT FEW YEARS, THAT POT OF MONEY
SHOULD PROBABLY NOT BE INVESTED IN THE SYSTEM BECAUSE AS WE
KNOW, THINGS CAN HAPPEN AND THEY CAN TAKE SOME TIME TO FILTER
OUT.

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