Even though the economy appears to be doing well at the
moment, circumstances are always in a state of change. As
a business owner, you’re likely wondering what you should
be looking at as a predictor of future economic conditions.
To answer this question, we turned to Brad McMillan, CFA,
CAIA, MAI, chief investment officer, Commonwealth Financial
Network ® , for expert insight into the trends business owners
should be paying attention to. In his blog post titled, “Three
Current Economic Trends to Watch,” Brad provides readers
with necessary insight into the future economic conditions,
and we are pleased to provide this commentary, with permis-
sion, to you.
It’s not dropping anymore. That doesn’t mean it will
spike again. It does mean the trend is changing —
and any expectations about investing and econom-
ics rooted in the experience of the past 10 years
may change as well.
For example, what does it mean for bond returns if
all investors get is a very low coupon payment? Not
what they expected, perhaps. What does it mean
if the Fed starts raising rates, rather than holding
them steady? What does it mean if consumers and
companies can no longer borrow whatever they
want at low rates? What does it mean when all of
that accumulated debt gets more expensive? This
is a different world. We don’t need to see much of
an increase to make things very different — and
much more restrictive — than they have been.
This is not politics; it’s math.
2 The Deficit
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Inflatio n
The world has been in a perfect storm of deflation. With glo-
balization, we have seen an expansion of workforces; with the
fracking revolution, we have seen energy prices come down;
and with technology, we have seen all sorts of business and
consumer costs decline. Over the past decade, no matter what
central banks did, inflation just kept dropping.
Now that the Republican tax bill has passed,
according to nonpartisan projections, the deficit will
go up by $1 trillion over the next 10 years. This is
on top of the already projected deficit of $10 trillion
over the next decade. In other words, the national
debt will go up by about half.
So, inevitably, will the debt service payments.
The debt service payments have been kept low with
low interest rates. But with rates no longer declining,
the burden of paying for that debt will get heavier,
not lighter. At some point, that debt will have to be
(continued on back cover)
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