2016 ROI Fourth Quarter Edition with Q & A HIS Capital Group Edition | Page 19

Looking through our mail bag of questions sent in by clients, colleagues, and our readers we’ve found so many sharing the same concerns that we thought we would share a portion of the transcripts from a recent mastermind call. Group: Which candidate was a better option for my bottom line? HIS: So many theories used to forecast market movement like The Presidential Election Cycle Theory which says markets are weakest in the year following the election regardless of which party is in office. Then there is the January Effect and of course “Sell in May and Go away”. There are exceptions to every rule in fact while the Theory held up for most of the 20th century it has been less reliable of late & especially the last 4 years. The first year after Obama’s second term saw a 27% increase. Group: Okay then, how does the president’s party affect the market? HIS: Research shows that since World War II under Democrats the annual growth rate for stocks was 9.7% and just 6.7% under Republican rule. A recent academic study titled “What to expect when you’re electing” found that there is no systematic difference between Republicans & Democrats when it comes to the stock market. What does matter is interest rates. The market does better when rates are lower. Group: As the only lender in this group what do you see as the market’s #1 risk? HIS: As we stated earlier rising interest rates are no friend to the market but, what is truly worrisome is the lack of “deleveraging” throughout the globe. Many countries have become more indebted. Debt driven growth has limits, the more that is borrowed, the more likely it is for lenders and borrowers to pull back. Private debt is high in advanced and emerging markets; this is what we need to keep an eye on. Group: The Federal Bank of NY releas ed it’s report on household debt triggering news reports that there is a new“bubble”. Have you heard anything about that? HIS: Well, yes and no. There are so many variables to look at but the largest factor we think that could certainly raise problems is student loan debt which has increased from $100 Billion in 2010 to approximately $1.26 Trillion today. It’s a pretty obvious problem since loans are not being serviced. In fact we read that the Wall Street Journal that 40% of Americans who borrowed from the governments main program are either not making payments or behind. There is also auto loan debt now over $1 Trillion which continues to accelerate but frankly, while that is a hefty number it is nothing compared to the mortgage meltdown. Group: What tips did you have to share with us and your investors especially those from abroad you mentioned called you everyday leading up to the election? HIS: Stop paying attention to all the doom and gloom and pay attention to economic indicators and trends. Use our history as a guide and expect market volatility. Finally, diversification is critical to your long term success. If “flips” are what you are into, take some of the money from each project and start adding a cash flow component to your business, if not you won’t make it through the next correction. If you would like to ask our team, or our economist a question to be featured in the next edition or on a future webinar, please email it to [email protected]. If you would like more information on our webinar series please visit us at www.hiscapitalgroup.com. Merry Christmas from everyone at the HIS Capital Group team! www.hiscaptialgroup.com 19