Has the World Gone Mad?

Daniel K. Stecich
VP Economic Research
Athena Private Wealth

Often, we are asked a question like this and with all the headlines and media stories we are bombarded with every day, it makes you wonder. And this leads to the question, “what does this mean for me as an investor?”

First, we don’t believe things are any crazier than they’ve been in the past. It’s just that so many events around the country and the world have seemed to pop up all at once. We have Korea acting irresponsibly, terrorist attacks around the globe and a press that thrives on any miscue the President offers up.  In our view, the Korean situation is the one that deserves the bulk of our attention. They have what appears to have a very unstable leader that not only has nuclear weapons in his arsenal, he is continually pushing the limits of the international community. While we do worry that this may escalate further, we also believe that he will soon cross a line that no one in the international community will allow. At that point, concrete actions (probably crippling sanctions) will bring the situation back in control. Until this happens, we must sit, wait and hope for the best.

In the meantime, let’s look at the impact this may have on our investments. It’s important to keep a long-term perspective in mind because the Korean situation could cause a shock in the market, but will likely be short lived. We should pay attention to the most important part of our strategy, and that is economic fundamentals, which have been quite encouraging lately. After many quarters of lackluster GDP performance, the final reading of the second quarter saw a reading of 3.0% growth. This comes on top of good readings on almost all economic releases of late. Additionally, according to Fed Governor Lael Brainard, global growth is contributing to the U.S. economy after having been a major downside risk and the outlook has improved in Europe, Japan, Canada and China as well. While all of this encouraging, we are near record levels in the equities markets and need to see a consistency of this data going forward.

At the end of this month, the government will release preliminary data for 3^rd quarter GDP, at which time we will give a more in depth report of our current economic client. Until then, be patient remain calm and most importantly, speak with your advisor with any concerns you have regarding your portfolios. Remember, you do have control and can make any necessary changes needed to improve your situation. The markets are going to do what the markets are going to do, just like they always have...but with planning, and forward-looking discussions, your advisor can provide a framework for helping you take control. Have a nice day and we will be back soon.