Is the U.S. economy heading for another recession?
Two investment strategists who spoke to a group of Thomson Reuters brokerage clients at a conference in Phoenix on Tuesday say the chances are slim. Despite the bear market blues, David Joy, chief market strategist at Ameriprise, says a double dip recession is unlikely. The U.S. is destined to be in two percent growth environment for the foreseeable future — “or 2.5 percent, if we are lucky,” Joy says.
Rick Robinson, regional chief investment officer at Wells Fargo, who is based in Scottsdale, Arizona, told attendees the chance of a recession in the U.S. is about 35 percent. However, the construction and manufacturing industries in the U.S. are operating at “Depression-like” levels, he says.
The downturn in equities presents a long-term buying opportunity in U.S. as well as foreign stocks, Joy says, but he notes that investors need a time horizon of at least three years. “If you have a five-year time horizon, even better,” he says. When asked when the Dow Jones Industrial Average will hit 20,000, Joy says it won’t happen until 2025. “I hope I’m wrong,” he quips.
Robinson says the 20,000 threshold may be reached even sooner, but first the U.S. economy needs to deal with current credit issues — for example, municipalities are cash-strapped and banks are holding bad mortgages. That deleveraging will take five to seven years to work its way through the financial system, he adds.
Financial advisers who are shackled by conventional wisdom or just looking for numbers to plug into off-the-shelf portfolio software may be asking you the wrong questions.
The fact that U.S. Treasury bonds managed to cling to their coveted triple-A rating this week failed to impress several prominent bond fund managers, who say they are lightening up on Treasuries and stocking their portfolios with corporate bonds instead.
Despite the debt ceiling deal, U.S. sovereign debt remains in the crosshairs of ratings agencies like Moody’s and Standard & Poor’s. The rating agencies remain concerned that the U.S. is “not doing enough to reduce spending and/or increase revenues to bring down the trajectory of the country’s mounting debt,” warns BlackRock’s head of fixed income portfolio management, Peter Fisher, in a report issued earlier this week. If the U.S. were to be downgraded by one or more agencies, he observes, “the odds are very high that there would be knock-on consequences of other borrowers getting downgraded — both corporate and public, in the U.S. and overseas.”
Reuters Money reached out to members of the financial community to see how they’re calming the folks they advise. An overwhelming majority expressed faith that lawmakers would broker a deal by the deadline, and markets would adjust regardless.
Here are 10 reasons they give not to juggle your investments right now.
1. A short-term crisis demands long-term thinking.
While it’s true a debt ceiling crash might resemble the sky falling, no one knows if that’s going to happen. Markets reward investors who stick to sensible strategies over time. “Rather than obsessing about the debt debate, we are telling clients to get engaged in a long-term conversation about risk management,” said Michael Gault, senior portfolio strategist at Weiser Capital Management. Gault, who manages $200 million, stressed that the last few months on Wall Street have been good ones. “The concept of ‘risk’ has taken a back seat as the markets’ recovery has been in a relatively smooth upward trajectory. We think there’s tremendous value in rebalancing here.”
The Sweets showed moxie compared to the majority of couples, however, and sat down together earlier this month with a financial planner. The picture is less harmonious for other couples, according to a new study released by the Principal Financial Group and conducted by Harris Interactive. Surveying more than 600 financial advisers, they found 82 percent of couples in financial planning have one spouse that doesn’t want to be involved.
As for why, experts say it’s like that classic reply to “How do I love thee?” That is, let them count the ways marrieds avoid the topic like the plague.
As a boy, Bernie Reed watched his father ride into the hills of their Nebraska farm on a yellow-orange Case tractor to farm corn, alfalfa and winter wheat. Bernie’s ancestors homestead has occupied that land since the 1800s, and his dad — a weathered, leathery man with a linebacker’s build — tackled it some 16 hours a day, resting only on church-going Sundays.
The Reed family farm prospered, nearly tripling in size to 1500 acres, and so did the Reed estate: Today it is conservatively worth $3 million. And the financial advising team that his parents, Doran and Maxine Reed, started with almost 40 years ago in Holdrege, Nebraska is the same one his mom uses today, along with Bernie and four of his five siblings. (A sister lives in Grand Junction, Colorado; Doran Reed passed away almost nine years ago).
The Securities and Exchange Commission is preparing a fiduciary standard for brokers that is expected to require them to disclose their financial conflicts. The Consumer Financial Protection Bureau plans to launch next week with a plan for new mortgage term disclosure forms. And Elizabeth Warren, the president’s adviser who set up that agency, has given speech after speech in which she discusses the virtues of requiring clear disclosures as a mode of financial regulation.
This summer, Charles Schwab is rolling out Clients Speak, a ratings and review service that gives clients a public platform to talk about their experience with the company. Based in San Francisco, Schwab says it is the first brokerage firm to publicly allow clients to provide such feedback.
GOP Congressmen and its money-trust allies, though, are busy trying to dismember the Dodd-Frank financial reform law despite the evidence that investor protection had been underfunded when ordinary people needed it the most.
Brightscope, which made a splash two years ago with its online performance measurement tools for 401(k) plans, is launching a free service on Tuesday to help people research and shop for financial advisers.
Brightscope’s new service could give a needed jolt of transparency to the financial advisory field, where finding an adviser is often a hit-and-miss process driven by word-of-mouth and referrals. And consumers find themselves wading into a market where almost anyone can hang out a shingle and start providing financial advice; planners may have any number of certifications or titles attached to their names, but none are required.