Richard C. Young & Co., Ltd. is a registered investment advisor and has been ranked by Barron’s as one of the top independent advisors in the nation for the last five consecutive years. We manage portfolios for individuals, families, and small businesses throughout the United States.
Not long ago, Wall Street’s favorite acronym was BRICs (Brazil, Russia, India, and China). The BRIC countries were hyped by many of the big brokerage firms as an investment opportunity with profound promise. As a group, the BRICs were believed to have attractive natural resources, a young overall population, and years of robust growth ahead.
Federal deficits and debt are a perennial worry for many investors, but while a burgeoning U.S. government is a long-term problem, public finance at the state level may be the more immediate concern. The Wall Street Journal recently ran a feature highlighting the troubling condition of state budgets.
Even nine years after the last recession, many state budgets still haven’t fully
In my January letter, I commented on how it would not be a surprise to see the Federal Reserve raise the Federal Funds rate four times in 2018. When the year started, the Fed indicated it would look to target a total of three hikes this year. In mid-June, as expected, the Fed raised rates for a second time in 2018, bringing the Fed Funds target rate up to 2%. The two additional rate hikes should come in September and December.
How many more times will the Fed raise interest rates before stopping? Many variables go into the Fed’s interest rate decisions; but, historically, short-term interest rates have been as much as 1.5 percentage points higher than the rate of inflation. With today’s Fed Funds rate at 2% and consumer prices rising annually at about 2.2% (as measured by core CPI), the Fed still has significant room to raise rates without overdoing it, even assuming moderate economic growth.
The unemployment rate matched an almost five-decade low of 3.8% in May. The only other time in the last 48 years unemployment has been this low was at the height of the dotcom bubble. We are experiencing a best-of-the-best labor market. Economic growth remains strong as well. According to the Federal Reserve Bank of Atlanta, GDP is forecasted to rise more than 4% in the second quarter. Industrial production is again humming, and corporate earnings are booming. Bloomberg data shows that, with 97% of S&P 500 companies reporting, earnings are up over 23% from the first quarter of last year.
Recently, I spoke to a long-time client who has been with Richard C. Young & Co., Ltd. since August 1995. When we have telephone conversations to review his portfolio, there is often no need for me to schedule the appointment on my calendar. That’s because for the past 12 years we’ve spoken on a Friday at 10:30 a.m. Naples, Florida, time and 7:30 a.m. Orange County, California, time. While our phone appointments are both predictable and consistent, the markets have been anything but.
NAPLES, FL
5150 Tamiami Trail North, Suite 400
Naples, FL 34103
Phone: (888) 456-5444 Fax: (239) 213-0770
NEWPORT, RI
98 William Street
Newport, RI 02840
Phone: (800) 843-7273 Fax: (401) 849-0002
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