This Week from Jesse Hurst

Jesse W. Hurst, II
CFP® CERTIFIED FINANCIAL PLANNER™
AIF ® ACCREDITED INVESTMENT FIDUCIARY


Horizon/Impel Wealth Management 
Investment Committee Updated Meeting Notes
November 2018
 
 
In the wake of the recent midterm elections and with the volatility that has persisted in the markets, we felt it would be beneficial to share some thoughts and perspectives on the economy and the markets. Please review the attached charts and economic perspectives. Please know that the joint investment committee of Horizon and Impel Wealth Management are paying close attention to the political and economic landscape. Please let us know if you have any questions about the information provided and/or how it impacts your financial situation or future. Thanks, and have a great day.
 
 
Economic Update
The market has rebounded following the midterm election. The S&P 500 is now 5% above the recent October bottom, which goes to show that volatility is a normal part of investing. We can't control much, but what we can control is our own behavior in the face of market concerns. Staying invested and well diversified are still the best ways of achieving investment goals.

For long-term investors, it's important to remember that the foundation of any investment conversation is a discussion of the economy. Historically, healthy economic growth supports stock returns while economic downturns result in market pullbacks. Thus, understanding where we are in the business cycle matters much more than day-to-day market movements.

The challenge for investors today is the gap between short-term and long-term expectations. In the short run, the markets seem to be in a good position: the economy is healthy, earnings are still strong, and valuations aren't too far stretched. The last time unemployment was this low was in December 1969. Full-year GDP may hit 3% in 2018 for the first time in 13 years. All in all, this is still a good time to be invested, especially with a balanced portfolio tailored to long-term goals.

However, it's difficult to fight the business cycle. Most economic data suggest we're in a later phase of this expansion, with earnings growth near a cyclical peak. The yield curve, which often functions as an early-warning sign of the late stages of an economic cycle, is extremely flat. For long-term investors, staying balanced in this environment in order to protect and grow wealth is still the most prudent course.

1. It's been a long economic expansion 
This is the second longest economic expansion on record - only the 1990's was longer. If this expansion continues past next June, it will officially be the longest in U.S. history. 

However, it's easy to see that the ten-year cycle during the 1990's grew three times faster than the current cycle. Fortunately, it's not just about the sheer pace of growth - the fact that growth has been steady has been enough to reduce unemployment to historic lows and generate strong corporate profits.

Economic and market cycles don't operate on a set schedule. If the economy continues to expand, we could continue to see attractive market returns for some time. And although there are signs that the pace of corporate earnings are near a cyclical peak, they are likely to remain healthy as well.

2. The unemployment rate is near a 50-year low


The unemployment rate is 3.7%, the lowest level since 1969. For many, this is the most concrete evidence that the economy is not only healthy, but perhaps in the later stages of the cycle. This chart makes it clear that unemployment has rarely fallen much lower.

This is even true of the so-called under-employment rate, which includes not just those who can't find jobs, but those who have given up. After 2008, many were forced to take part-time work while many others dropped out of the labor force altogether. However, even that rate has fallen dramatically in the past nine years and is at its lowest level since 2001.

All of this points to a healthy economy in the short-run. While this could be positive for investors for some time, it's important to stay balanced as volatility rises.

3. A flat yield curve suggests we are later in the cycle 


So while the economy is healthy at the moment, where are we in the business cycle? Many measures such as the unemployment rate and inflation suggest that we're in the later stages of the economic expansion. The yield curve also reflects this and is now flashing yellow.

This is because interest rates have risen this year, but not all at the same pace. While the 2-year Treasury yield is at a cycle high of almost 2.9%, the 10-year yield is only 3.2%. In fact, the 30-year yield is only 3.4%.

The yield curve is not a perfect signal, and it is no doubt being distorted by foreign demand for U.S. Treasuries. Regardless of the cause, however, it will likely place pressure on economic growth and Fed policy. Thus, the yield curve isn't flashing red just yet, but is another reason investors should maintain balanced portfolios nonetheless.

The bottom line? The economy is healthy but is also likely to be in the later stages of the cycle. Thus, there is a gap between short-term and long-term expectations. It's important for investors to stay invested and balanced.

Past performance is no guarantee of future results. There is no guarantee an investing strategy will be successful. Diversification does not eliminate the risk of market loss. Additional risks are associated with international investing, such as currency fluctuations, political and economic stability, and differences in accounting standards.
  
*Securities and advisory services offered through Cetera Advisors LLC, member FINRA/SIPC. 
Cetera is under separate ownership from any other named entity.

*Disclosures
The views stated in this letter are not necessarily the opinion of Cetera Advisors LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change with notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.


*Investments in securities do no offer a fix rate of return. Principal, yield and/or share price will fluctuate with changes in a market conditions and, when sold or redeemed, you may receive more or less than originally invested. No system or financial planning strategy can guarantee future results.*
 

Sincerely,

Jesse W. Hurst, CFP®, AIF®

Your Team at Impel Wealth Management
  

2006 4th St.
Cuyahoga Falls, Oh. 44221
Phone: (330)800-0182
Fax: (234)312-0460
Website:  www.impelwealth.com

Emails:
Leslie.Campanini@impelwealth.com
 
 
Securities and advisory services offered through Cetera Advisors LLC, member FINRA/SIPC. Cetera is under separate ownership from any other named entity. Recognition from rating services or publications is no guarantee of future investment success. Working with a highly rated advisor does not ensure that a client or prospective client will experience a higher level of performance of results. These ratings should be construed as an endorsement of the advisor by any client nor are they representative of any one client's evaluations. 


 


Is there something we can help you with?  Please call me at 330.800.0182 or email me directly at jesse.hurst@impelwealth.com.

Impel Wealth Management 
2006 4th Street, Cuyahoga Falls, OH 44221    
P: 330.800.0182    TF: 844.422.5550    F: 234.312.0460