On the other hand, the market (investors and traders) determines the rest of the interest rate curve.

It also gives the Fed room to move rates lower if the economy slips. By increasing rates, they can put the brakes on growth limiting inflation. Since interest rate changes can take time to move through the economy, the Fed preemptively will move to limit anticipated problems, i.e. The Fed (which controls short term rates) is witnessing strong domestic growth and an upward creep in core inflation. There are several reasons why this is occurring. Tagged: west university, financial advisor, wealth management, Economic Outlook, portfolio management, interest rates, apg capital, adam gross, coronavirus, Stock Market, houston, advisor, cfp, investing All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All economic and performance data is historical and not indicative of future results. As with any investment or investment strategy, the outcome depends upon many factors including: investment objectives, income, net worth, tax bracket, risk tolerance, as well as economic and market factors. The future performance of an investment or strategy cannot be deduced from past performance. This material does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. The information and material contained herein is of a general nature and is intended for educational purposes only. It is not possible to invest directly in an index. Indexes are unmanaged and do not incur management fees, costs, or expenses. I look forward to seeing you all in person soon.Īdvisory services offered through APG Capital Asset Management, a Member of Advisory Services Network, LLC.Īll views/opinions expressed in this newsletter are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. I truly appreciate our collaboration and sharing of ideas. This marks the third anniversary of APG Capital and I want to thank all of my clients for your trust and time. Please stay safe - avoid crowds, wash your hands and, for the safety you and your loved ones, wear a mask. Take a closer look at your expenses so there are no holes in your budgeting and cash planning.ĥ. Reviewing your mortgages to see if a refinancing makes senseĤ. With the prospect of higher future tax rates, there may be opportunities converting Traditional IRA holdings to a Roth IRA.ģ. Smart charitable giving, either to a Donor Advised fund or a Qualified Distribution from IRAs.Ģ. Maximizing deductible 401-K and IRA contributions, (the deadline for 2019 contributions were pushed to July 15th this year Make sure you are taking advantage of tax savings. While the market continues to confound, we recommend paying attention to areas we can control. It took about 15 months for the market to fully recover the pre-virus highs. After the market bottomed, it quickly rebounded, traded in a range for a year, and then trended higher. During the Spanish Flu of 1917-1918 as shown below, the market then similarly plunged about 33%. It is useful to note how the market reacted to past pandemics. We may be in a stage of the market recovery where the market will bounce around, finding where these opposing forces find an equilibrium.

But stock prices should also weigh the risks of a depressed economy on the profitability of corporations and demand for hard assets. This, in turn, pushes assets like stocks, real estate and commodity prices up. The effect of this is to devalue dollars, which increases inflation. The payments to taxpayers and businesses, combined with the Federal Reserve bond buying programs (see the chart below of Fed activity), have created a flood of new money into the economy. The most reasonable explanation is due to the unprecedented amount of government stimulus being pumped into the economy. But with the uncertainty that exists, most of those estimates are impossible to determine so optimism over future profits only tells part of the story.

Stock market valuations may imply that investors are looking past the next few quarters and that corporate profits rebound fairly rapidly in 20. Stock prices are determined by the present value of estimated future earnings. With such a bleak background, this strength seems fairly bizarre but there are reasons for the S&P 500’s 20% quarterly rally to end the year down only 3%.

The United States is still grappling with escalating Covid-19 cases, historically high unemployment, and a severe recession, all while the stock market had the best quarter in twenty-two years.

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