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Beth Kraszewski named as Top Best-in-State Woman Wealth Advisor by Forbes

How the Past, Present & Future Impact Your Financial Plan

How the Past, Present, & Future Impact Your Financial Plan

“Our hearts are aching, our prayers are praying, our flags are waving, never forget” – Betsy Ross, known as the maker of the American flag.

As we just celebrated our Independence Day during a year which has had so many struggles and changes, I found this quote to be quite timely.

Our hearts have ached over the struggles that our communities have encountered. We have prayed that all will experience the same freedoms. We waved our flags last weekend in celebration of Independence Day and certainly we will never forget these times. I tell my children that the past few months will certainly find a permanent place in our country’s history.

In this blog, I will be discussing how the recent past, present, and future impact your financial plan.

The Past

As we look back over the past quarter, we have seen growth in both the stock market and the economy. My family has spent time in Colorado this summer and last weekend we went hiked on a trail that was very high in elevation. It was clear that a fire had passed through the area within the past few years. At one point I was thinking about how sad the devastation must have been as the fire was roaring through – we could still see scorched trees. On the other hand, there was also many signs of new life – new trees growing and plants coming to life.

In nature, fires have a purpose, they clear out the dead trees to provide space for stronger, new life. As I look at the first part of 2020, I believe the same has been true. Sometimes the markets and the economy become overgrown and while a correction in the markets and a slowdown in the economy can be painful – I believe going through times such as this open the door for new innovation, new business, and new life.

Let’s look back at a few things that happened over the past year.

Yes, we were officially in a recession. It is believed this will me one of the most memorable but also one of the shortest recessions in history. We will have official data soon, but it is believed the recession started in February and ended in May. The economy is growing but we haven’t returned to previous levels.

Jobs took a huge in in many industries – especially in tourism and entertainment. When this occurs, it is always concerning that this will trickle to other areas of the economy and that we will start to see consumer spending take a huge hit or people starting to default on mortgages. The government stepped in and the stimulus provided allowed for minimal impacts to secondary areas of the economy.

Over the past quarter, we have seen one of the greatest market rebounds in history. Markets have returned to the levels from the fall of 2019. Many people felt they lost so much money this year, which was true for a period of time, but the markets have now returned to a level of where they were less than a year ago.

The Present

Day to day, we are seeing fluctuations in the markets. One of the major issues impacting the markets both positively and negatively is the opening and closing of state and local economies.

The U.S. relations with China continue to be concerning and we continue to watch this closely.

What are we doing now to make sure your account is positioned? We made changes in most accounts early this quarter. We moved many accounts to have more exposure to active management versus index management. We also reduced the international exposure in many accounts.

My dad always says, water always runs to lower ground and money always flocks to safety. When there are fears in the world, we often seen more money pour into U.S. investments. Along with this as well as other concerns about the international markets, we decided to reduce international investments in most accounts.

The Future

Probably the largest question for the future is about the upcoming elections. While it is too early to predict a winner, we know that President Trump has some obstacles to overcome. If he were to win, he will be the only U.S. president to retain his office when there was a recession in the same year as the election. There are concerns about how a Biden win might impact the markets especially considering a partial rollback in the Trump tax cuts. Biden’s current tax plan would be an increase to current taxes but still wouldn’t be at the same rates as the Obama administration.

As mentioned earlier, the economy is believed to be growing since April or May. That said, we will stay a way to go for the economy to reach its previous levels. It is estimated we will see the economy return to previous levels in late 2021 at the earliest.

I want to talk about the U.S. debt for my final point. Yes, the Fed’s balance sheet nearly doubled from late February to the end of June. While this is a dramatic increase, I want to remind you that the way the government services debt is different than how people pay off debt. The government only needs to cover the interest payments. While the debt is concerning, I don’t feel that it is something that we can’t overcome in the future.

Let’s recap…

Rick Warren author of The Purpose Driven Life said, “We are products of our past, but we don’t have to be prisoners of it”. As we look over the first part of 2020, I think we have all been impacted and changed by the circumstances, but fortunately we don’t have to carry this devastation with us to the future.

As we look back at this video, we first talked about the past quarter where we likely went through one of the most significant and shortest recessions in history. We then talked about the present and discussed the position we have taken in your accounts to position you optimally for the current economic and market environment. And finally, we talked about the future and how we are monitoring the impact of the elections closely.

If you liked what you read today and would like to learn more about how recent events have impacted your financial picture, I invite you to click below to set up a free, 30 minute call where you can have your questions answered.

I hope all of you and your family have a wonderful summer!

Opinions expressed are those of the author and are not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.