By Brandt McDonald
Happy New Year! Hopefully, you enjoyed a relaxing and engaging holiday with friends and family. Now that 2014 is in the books, a moment of reflection is appropriate in order to use the lessons of the past as a spring board to a new beginning that is full of critical life choices ahead.
Financially speaking, last year was full of its usual surprises. Looking at 2015, I suspect that growth (global stocks) will be a bit harder to come by and the risk (volatility) to get it will be far greater than the past couple of years. The U.S. stock market over the past several years was supported by an accommodative federal reserve through its open market activities – more commonly referred to as quantitative easing. This key ingredient will be missing in 2015. Essentially, the fed is no longer “printing” money and is attempting to allow the U.S. economy to gallop on its own. It remains to be seen as to whether the fed will finally begin the process of rate normalization by raising the federal funds rate sometime in 2015.
More importantly, fiscal policy in Washington should have the greatest impact on U.S. economic activity going forward. The political winds have shifted and a republican controlled congress is expected to challenge President Obama on a host of regulatory and tax policies. Any movement in Washington that shrinks the size of government, improves the tax code, or refines the regulatory environment in a way that would empower the private sector should improve growth projections over the next few years.
Essentially, the Federal Reserve has done all of the heavy lifting through monetary policy to fuel the engine of growth in the U.S. The fed will take more of a backseat role going forward and hand the baton to legislators in the hopes that they will work together with the White House to promote legislation and new laws that encourage private sector freedom and free market capitalism.
The greatest threat to a positive growth outlook in the U.S. comes from increasing uncertainty and the potential for chaos in the international market. To be clear, there are real problems abroad. A recent 50% decline in oil is not the type of thing one would expect to see in a thriving global economy. Russia has been brought to its knees and its economy is in total collapse. Japan continues to print Yen like mad to come out of recession. China is cutting interest rates in an attempt to avoid a “crash landing.” And Europe is teetering on a thin margin that sees no immediate improvement on the horizon.
Our goal at McDonald, Barranco, and Hagen is to help our clients make sense of what is going on in the world, especially how it will impact their investment portfolio. The vast majority of our clients are between the ages of 55 and 85. The greatest fear our new clients have is that they will lose significant wealth. A close second is the anxiety that they don’t have enough money to make it through retirement. For these reasons our primary goal is to genuinely know our client. What are their hopes and dreams? We want to know what “living” really means to them. Only then, can we create a risk-adjusted plan that will meet their long-term financial objectives. Interestingly, I have found that most people have a very difficult time specifically telling us what they want in life. If this resonates with you, I would encourage you to start the New Year by making the time to seriously contemplate your future. Otherwise, you risk waking up one day with a life that you never wanted. New beginnings beg for answers to important questions. For our purpose, the question has to be “what do I want my life to look like from this moment forward and how do I figure that out?” The answer to this question is the impetuous to a sensible, well-thought out retirement plan. Only then can you decide the type of life you want. A seasoned wealth management team can help you with many of life’s critical decisions so that you can have time to enjoy retirement with as little anxiety possible. Cheers to you and the New Year.
Until next month, remember to never run with the herd, always be thankful, and look to the future with anticipation of what’s yet to come.
Securities offered through LPL Financial. Member FINRA/SIPC.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The opinions expressed in this material do not necessarily reflect the views of LPL Financial.
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