Co-Contributed by: Angela Palacios, CFP® and DewRina Lee
On June 15, 2017, our Director of Investments, Angela Palacios, CFP®, and Portfolio Administrator, Jaclyn Jackson, covered some interesting topics on the current state of the economy, markets, and politics. Overall, it has been a quiet year with markets marching upwards steadily, with a bit of volatility creeping into technology stocks over the past week.
Here is a recap of key points from the “Mid-Year Investment Update” webinar:
- The Fed Meeting Last Week
- The Fed approved its second rate hike of 2017 even with inflation running below the central bank’s target of 2%.
- Diversification remains important in fixed income portfolios.
- Auto Industry
- Despite record auto sales last year, the vehicles on car-dealer lots remained near record highs earlier this year.* The first quarter of 2017 saw nearly a three month supply sitting on lots.
- Some producers have already offered buyout packages or announced shutdowns over the summer.
- The automotive industry is known for its volatile nature, and even now is experiencing a lot of disruptions—electric vehicles, driverless vehicles, and companies like Uber are changing the auto industry.
- Are there any indications of an approaching recession? The index of leading economic indicators has been steadily growing since 2009 with no trend of flattening that you normally see when headed into a recession.
- Markets have been said to be expensive.
- Valuations of the S&P 500 are slightly above average for the past 25 years (17.5 versus 16 on average).
- Fiscal Policy
- If tax cuts and infrastructure spending were to occur, they could offset the potential drag that rising interest rates may have on growth in the U.S.
- How can this be achieved? Tax reform requires 60 votes (the majority vote is currently at 52) or through budget reconciliation, which can only be done once per year.
- Active/Passive Discussion
- Not an all or nothing choice. The Center utilizes a blend of lower-cost index investments and we select active managers to complement the core investments to achieve a specific goal such as adding potential outperformance or reducing risk.
- Trade settling cycle will shorten from 3 to 2 days in September.
- Reducing credit and counterparty risk, increased market liquidity, lowering collateral requirements.
If you missed the webinar, take twenty minutes and please check out the replay below. If you have questions about the topics discussed, please give us a call!
Angela Palacios, CFP® is the Director of Investments at Center for Financial Planning, Inc.® Angela specializes in Investment and Macro economic research. She is a frequent contributor The Center blog.
DewRina Lee is an intern at Center for Financial Planning, Inc.®
Any opinions are those of Angela Palacios, CFP®, and DewRina Lee and not necessarily those of RJFS or Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. *Sources: https://www.edmunds.com/car-news/auto-industry/new-vehicle-inventory-swells-in-february.html