ROI: March 2020 Economic Report Volume 35 | Page 2

From the Desk of Sam Ally
T
here’s an insurance company tag line that goes
something like: “we know a thing or two because
we’ve seen a thing or two”. I believe that should be
the tagline for myself and the 76.4 million others
of my generation. I joke around a lot with the team at HIS
Capital HQ that “I’m not quite sure I know the answer to
questions I’m asked because I work hard at my craft or the
fact I’ve just been around a while”. Either way when it comes
to the state of our economy, I feel like I’ve read the book,
seen the movie and got the T-shirt. It’s all one big television
rerun we can view on the streaming service du jour.
We’ve closed the books on another year and decade on a
high note as markets enjoyed an exceptional 2019. In fact, it
was the second-best year in two decades! He we are basking
in the bountiful glow of double digit returns and then BAM!!
we get T-boned in the middle of an intersection and our
euphoric state disappears faster than my buddy Tom when
it’s time to pick up the dinner tab. The “Wonks of Wall Street”
recently issued a report urging investors to tread carefully
and temper expectations moving forward. I did a double
take after reading that report as I for one never imagined
the word from Wall Street would be one of caution. For once
however, they may actually have it right in saying this next
year, quite possibly thru this next decade, will be anything
but the Roaring Twenties. This past decade the S&P 500 saw
annualized returns over 13%, but forecasts are calling for
less than half of that. I’m all about tempering expectations
fully aware that risk is associated with any investment, but
I was curious as to why they’re rolling out the caution flags.
Surprisingly, the report did not reflect specifics, but if we
look back at last year and further, maybe we can pick up on
what triggered their warnings.
While those that stuck with it recovered their losses and more,
in many ways it was a tumultuous decade, and we heard the
economic gloom and doom conversation throughout this
historic economic run. From the European bond market
scare (as Spain was teetering on the verge of default), to
Brexit, IPO chaos, and the trade war with China (remember
President Bush smacked the EU similarly in 2002). Even more
recently recession fears grew strong as Iranian missiles were
shot into Iraq, causing a drop in the 10-year yield. Good
golly, strife in the Middle East never saw that coming right?
Impeachment trials, an acquittal, an oval office promise
of vengeance, and of course the upcoming presidential
election all stirring the pot. Oh, but it’s not just a presidential
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election, all 435 seats in the House of Representatives, and
34 of the 100 seats in the Senate, will also be contested. Will
the balance of power shift?
So now we’ve got a volatile pot of uncertainty brewing,
reinforcing Wall Street’s cautions, right? Queue, the doom
music as investors ask the question “how is this all going
to affect my portfolio”? Should we liquidate and hold our
cash until the coast is clear, or increase exposure into riskier
opportunities? Yogi Berra (look him up young folk) once said,
“it’s like Deja vu all over again”, somehow that applies in this
instance. As history has proven during times of uncertainty,
the masses that’s us John Q public types, have made short-
term reactionary investment decisions negatively affecting
our long-term income potential. Our future-selves get
the short-end of the stick at a time in our lives when it’s
needed most. But even all of this isn’t the reason for the
warnings. Initially, I thought hmm we’ve put in some checks
and balances post-crash and now the financial wizards are
looking out for us by urging caution. I’ll be doggone they
did learn! But alas, the only reason for the warnings; the big
boys n girls in the financial district just can’t find the same
opportunities enjoyed during this run. That means, foolish
money is hitting the streets in abundance searching for a roll
of the dice. The panic that may ensue because of it could be
catastrophic especially for those still trying to recover and
squeeze out every dime they can.
We’ve got a different set of issues today frankly, yet economic
growth is decent, and we may just plod along at a reasonable
pace for a few more years. But as we dig beyond the surface,
things look a little bit more fragile. We’re looking at a tale of
two realities; excluding housing and tech, financial conditions
are negative. The Fed Reserve anticipates no interest rate
moves in 2020 and perhaps only one hike in each of the
next two years, that all translates to this: for investors and
savers who are saving for retirement or college education,
you’re likely going to need to set aside more as returns won’t
be as generous. For borrowers on the other hand, lower
rates loom for credit-cards, auto loans, and adjustable rate
mortgages. Sound familiar anyone? But wait there’s more,
and for only $19.95 I’ll show you how you can become a
master prognosticator and time the market. Couldn’t help
that gang but stay with me here.
The so-called jobs report a key used to determine economic
health is rosy seemingly near full employment, but is it really?