At the most basic level, business transition planning is a strategy that can be put into play when a business is sold or changes hands. For company owners nearing retirement, a successful transition plan can play an important part in creating and preserving the value of the business after it has changed hands.
Atlanta Financial Blog
When Bad News is Good News – Or Is It?
As we move past the midpoint for 2019, the economic outlook for the US continues to be positive but at a slowing pace, with market watchers focusing on the Fed and interest rate movements as a signal for what might lie ahead. Why are many focused on the Fed and how do markets react to interest rate moves?
The jobs report released on June 7 was much lower than expected (just 75,000 non-farm jobs added in May, which was 100,000 less than expected). Previously announced job gains numbers for March and April were also revised significantly downward meaning that job growth in 2019, while still positive, is significantly lower than it was in 2018. This is as expected because as the economy approaches full employment, job growth should slow down. However, as you reach full employment, wage growth should speed up as employers bid against one another for available workers. But this same job report showed wage growth slowing down (although still in positive territory). Putting all of this together, the conclusion must be that at least for the time being, economic growth (although still very positive) is slowing.
But apparently, bad news on the economic front is sometimes good news for the equity markets, as both the S&P and the DJIA were positive on the day the jobs report was released. What happened? A weak jobs report (or any other weak economic indicator) increases expectations that the Fed will soon start cutting short-term interest rates to bolster continued growth in the economy. Lower interest rates reduce the cost of doing business for companies which enhances their bottom line. And because lower interest rates result in lower bond yields, equities become a relatively more attractive investment option, pushing stock prices higher. Lower interest rates help consumers as well, as it is easier to do that home renovation project or purchase a new car. Consumer spending is a big driver for GDP growth as it spurs economic activity. The general consensus of market watchers based on the June 7 jobs report was that the Fed would reduce rates possibly within the next few weeks but certainly by the end of the year.
However, on June 19, Fed Chairman Powell said that the Fed would leave rates unchanged and did not expect to cut rates this year, although will likely have one rate cut in 2020. And on this same day, once again the S&P and DJIA were positive. In this case, “no news was good news”. By not reducing rates, the Fed signaled that the economy (while slowing), is still in positive territory and growing. The resilience of the equity markets (to both an unexpectedly weak jobs report and the indication by the Fed that a rate cut is not coming soon) should be instructive to investors. Watching one indicator (Fed rate cuts or lack thereof) is not a prudent investment strategy.
As this blog is posted, another jobs report is due and other economic reports will have been released. Will it be “good news” or “bad news,” or does it really make any difference at all?
The underlying lesson in all of this is that it is not possible to predict short-term moves in the equity markets. There are too many factors and focusing on just one (the Fed or a specific economic report) will many times lead investors to the wrong conclusions. Time and time again, the financial markets have proven that investing is a long-term proposition with many twists and turns along the way. The important thing to focus on are your own financial goals and tolerance for market volatility. Try to drown out the rest of the noise around you. Of course, if you have questions about recent economic events or your own financial situation, please give us a call. Our advisors at Atlanta Financial would be happy to talk to you about our perspective and how current economic events might affect you.
The travel industry has begun to see growing demand as we move closer to summer. However, not all travel will be the same, as much of the demand is directly related to the COVID-19 vaccine and reduced CDC restrictions. Instead, industry trends have emerged based on individual comfort levels as they apply to different modes of travel.
Below we will explore some of the factors that have contributed to an increase in travel and how different industries are responding to it.
Following a year of economic instability, it appears that many of us are turning our attention to something that’s been around for decades, but has recently piqued national interest – inflation. In fact, a recent study found that people are Googling the word “inflation” at a rapid rate, with a peak not seen since 2010…
As mothers, sisters and daughters, women are often counted on to be caregivers for family members in need. Whether it’s something as small as a cold or as debilitating as a terminal illness, women are typically the ones to care for and help out when a loved one is sick. But what happens when the caregiver is in need of her own care? Too many women are stuck facing this dilemma head on, instead of preparing for it while there’s still plenty of options, resources and time ahead. Below are a few reasons why it’s so important for women to plan for their own long-term care strategies now.