July 2018 Client Letter

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

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June 2018 Client Letter

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.

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May 2018 Client Letter

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.

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April 2018 Client Letter

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.

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March 2018 Client Letter

Did exchange-traded funds (ETFs) cause the February stock market correction? “Nonsense,” is the response of many experts to that question. ETFs, provide access to baskets of securities that mirror indexes and can be bought and sold throughout the day, just like stocks. “ETFs are the future of investing. Just ask anyone!”

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