The State of the Economy: Key Questions for Investors
Just recently, President Obama gave his fifth State of the Union address—and as usual, the state of the economy was an important theme. While there are certainly signs of strength, such as an improving housing market, there are still many causes for concern, as well.
Politics aside, as an investor it is important that you’re paying attention to the economy. We all hope that the optimists are right, and that the economy really is heading back towards full health. But below are four questions that must be considered:
Is unemployment ever going to return to “normal” rates? Despite the fact that the stock market has rallied and that the housing market is improving, unemployment remains high. This is a serious concern, because without a return to full employment it is unlikely that the economy will ever start “booming” again.
Will inflation wipe away years of saving and investing? Right now, the conditions are ripe for severe inflation. The government continues to flood the market with currency, much of it borrowed. Interest rates remain extremely low. Sooner or later, the basic laws of supply and demand must take effect, and inflation is the likely result. Is your portfolio protected against the corrosive power of inflation? If not, you run the risk of seeing your gains wiped away by the increasing cost of living.
Will government deficits necessitate higher taxes? The federal government is currently running up our national debt at an alarming rate. It’s clearly unsustainable—and ultimately the only options are to reduce spending or to increase taxes. Many observers believe that rising taxes are almost a guarantee, particularly for individuals with a high income or high net worth. Are your investments protected against the threat of rising taxes?
Does market volatility threaten investments? The 1990’s and much of the early 2000’s were great times for the stock market. But in 2007 and 2008, all that changed as the market crashed. Unfortunately, countless retirees and investors saw their life’s savings wiped away. The market seems healthy at the moment—but is further volatility looming? Are your investments protected against stock market volatility?
If you’d like to learn more, or if you’d like help creating an investment portfolio that is protected against inflation, taxation, and market volatility, get in touch with us today!
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Depaul University—O’Hare Campus in Chicago IL
July 31, 2012 7:00 PM