The economic indicators are positive. However, the Fed is raising rates. How does that impact things?
The economic indicators show:
- Unemployment at 3.7%. We have not seen such lows since 1969.
- 4.2% quarterly GDP is amazing and hasn’t happened since 2014.
- The S&P 500 is looking great, with YTD yield of 10.54%
- PMI continues it’s impressive streak, performing well above-average (50% is considered average) for the past 22 months.
This is good news. But…
Rising interest rates will certainly have an impact on consumer spending as well as impact the cash flow of businesses that do a lot of borrowing. Larger companies often have surplus money to help them weather a tightening cash flow. Smaller companies don’t. As such, rising interest rates will impact smaller companies more than large. C fund will likely be in better shape than S fund.
Bear in mind, the economic indicators are positive and the economic fundamentals are solid. Businesses are being profitable, they have extra capital to hire (lower unemployment), wages are seeing increases (3.3%) and investors have more money to put into the market. Let’s see how long this lasts with increased interest rates. There will be short term volatility but, overall, no gloom and doom, as the media like to portray it.
I have the updated numbers for October 2018. The report is on the site. Be sure to login and check it out!
Pre-retirees, if the short term volatility is a concern for you, we should talk. You probably need a clearly defined distribution strategy that identifies which bucket you should dip into and when. Float me an email if you want to discuss.
Oct.-2018-ReportClick here to download the portfolio reports
