Update from Nathan Woods, head of The Trust Company’s Investment Committee, about the Markets’ recent activities and how we’re keeping your best investment interests in mind.
How are the following effecting the market and your investments?
- Election Year
- Interest Rates
Hello and happy July. Nathan Woods, Relationship Manager and head of the investment committee at The Trust Company here.
As the second quarter of 2016 has come to an end we have heard three main topics of concern at The Trust Company: the U.S. presidential election, interest rates, and Brexit. Though many other individuals have many other concerns as well, these are the main ones we have addressed over the past quarter, and I would like to do the same with you over the next couple of minutes.
First, the presidential election. There have been discussions for months and we have discussed this topic for months and no doubt will continue to do so not only until November but at least four years thereafter. No matter who wins I guarantee there will be more than a few people who are upset and more than a few people who are happy. Granted historically we have a better stock market in democratic presidencies, but this isn’t always the case. Historically too, most of the anticipated volatility given the election is already factored into the market by the time November and election time arrives. So long story short, someone will be elected regardless. No matter what side of the fence you are on keep in mind that it is a long-term cycle so staying invested over the long term and not being too worried stock market wise about the election.
Second, interest rates. We are still near the lowest levels we have seen in years in the United States. While interest rates seem like surely they are only primed to go up there is potential that they fall further. So just like we talked about with interest rates or bonds or stocks protecting against each individual risk so the fact that both options are possible you want to protect against that. That is what we are doing within investors fixed income portfolios. We expect the Fed to raise rates no more than once (if that) before year end. Granted, low rates help those consumers who are taking on debts with low loan rates, mortgage rates, and other things like that, but they hurt investors in bonds, money markets, CDs who want to earn interest on their investments. The Fed considers factors such as inflation, unemployment, and other things before raising rates. Inflation isn’t in a place where we can do that and neither is unemployment. Granted, the economy really can’t afford a rise in rates right now just given the sensitivity it has.
Lastly but not least is Brexit. I highly doubt if you’ve read, watched, or heard the news lately that you haven’t heard of that term. Last week on the 23 of June the United Kingdom voted 52% to 48% to leave the European Union. Now parliament must past the vote at which point the UK will begin upto two year or so process of completing their exit. Though this is a historical period it’s not a period for historical investor concern. So we have seen volatility since Brexit happen, both on the downside and the upside, but long-term the leave shouldn’t be a continued volatile issue. It is estimated that the exit or the Brexit will reduce the United Kingdom’s GDP by about 1% a year on average over the years, but still it is a good place to be invested long-term. It’s been a good time to assess what our investments were and make sure not only within the United Kingdom but other countries worldwide that we aren’t too over allocated or under allocated as long as investment are prudent.
These three concerns definitely won’t be last trying time or trying issues that we face. Rely on those you trust to ensure your investment portfolio is prudent and that your financial plan is secure. Of course contact any of us at The Trust Company if we can help ease your concerns, those you face personally, or if we can you prepare for the future returns and concerns that we have yet to anticipate.
Thanks again for your time today. Have a great July and summer and stay in touch with us if we can help you at all.