Two important developments have boosted stock markets in the new year. First, the Fed has adopted a more dovish tone relative to additional rate increases in 2019. Second, negotiations between the U.S. and China have apparently been successful in narrowing the trade differences. The relief felt by equity investors is palpable. Perceived risk may have fallen but lurks near the surface of investing waters. Caution is warranted.
- Powell’s Do-Over: Fed Chairman Powell softened his tone on future rate increases in a recent speech, realizing that the Fed needs to project more flexibility. With inflation in check, we see no reason why the Fed needs to engineer a recession with unnecessary rate hikes at a sensitive time.
- U.S.-China Trade Talks Moving Along: Along with Fed policy, the trade conflict with China may be the biggest market issue. NPR reports on where the negotiations stand. President Trump, who by numerous reports watches the stock market closely, needs a deal. With a slowing economy and a greater dependence on exports to the U.S., China needs a deal. We expect it to get done. We also expect more negotiation bumps in the road.
- Worst News Priced In? This CNN Business article/video makes an interesting case that the stock market has already “priced in” much of the risk. It may be essentially correct in the near term, but we aren’t quite as confident looking out more than a few months.
- Shutdown Fallout: As the shutdown continues, the ripple effect will widen and hurt more individuals/families and the economy. Tariffs were already hurting some farmers, a key Trump voting constituency. Now agricultural support checks are being delayed. Pressure will mount on Congress to push for a resolution.
- Byron Wien Predictions! Byron Wien, a respected investment strategist, is bold enough to make annual predictions. His predictions are often interesting and thought provoking. Here are his ten surprises for 2019. It would be interesting to survey how far ahead people believe we can predict in today’s world. We know the shelf life of useful economic forecasts is barely one year. I’m growing more skeptical every year that predictions about financial markets have that much validity beyond a few months.
- Charitable Gifting and RMD Planning: Any reader subject to an IRA required minimum distribution in 2019 should check with their advisor or accountant before starting their charitable gifting this year. Our blog, Why You Should Consider Using Your IRA RMD for Charitable Gifts, addresses this tax planning opportunity in detail.
- Retirement Community Trends: We are doing noticeably more research and planning for clients that involves retirement communities. Apart from an aging population, there are some interesting trends. One is more interest in retirement communities vs a home care strategy. On the higher end, there are more luxury care retirement communities. It’s enough to make you look forward to the golden years (not exactly as they said in that rental car commercial).
- Move It! That’s me speaking to myself of course. Once again, the experts reinforce the importance of aerobic exercise to optimal aging.
- Green Book: Four of my go-to movie goer friends have recommended Green Book to us, putting it at the top of our short list. Glenn Close just won a Golden Globe for her role-am not sure if she still owns a Maine home, but I am pleased to see her honored.
Feel free to send us feedback on any topic or make a request or to forward the notes on to anyone who might be interested.