One can only hope.

Although 2019 saw financial markets do very well, at times it was a pretty rocky road. The rocky part, in and of itself, is neither surprising nor necessarily a bad thing. After all, we frequently remind anyone who cares to listen that advancing markets must climb a ‘wall of worry’.

What was troublesome beyond the ordinary in 2019 was that so much of the rockiness was born out of illusion, innuendo and fabrication. Actually, this assault on reality seems to have arrived on stage with a bang even before 2019 started. In December of 2018, the markets roiled under the hysteria of impending recession. In retrospect, it is easy to see that a lot of that big scare was just that — a big scare with little foundation. Sure, there were a small number of yield inversions but hardly enough to warrant the declaration of “Recession!” — unless, for some reason, you want to. Who would want to? Maybe those who would like to see the current administration perform more poorly than it apparently has. The fear mongers chose to ignore a lot of countervailing data such as continuing jobs growth, advancing wages across all levels of earners, strong consumer confidence, etc.

The Mueller Report, which looked into the issue of Russia’s involvement with the 2016 election, has been referred to as something of a national Rorschach test in which people of varying political stripes could see what they wished to see. Seeing threats of recession while there was little actual evidence may have been a similar phenomenon. So, what we are hoping for, with fingers crossed, is that in 2020 everyone in the ‘observer’ community (meaning pundits, reporters and financial writers) take a bit more care to see what actually exists, regardless of their own personal point of view.

With all that being said, it is important to note that the markets themselves have a bias — to the upside. Certainly, all years are not going to end higher than they began but, over time, history shows that ‘up’ years occur much more frequently than poor ones. Predictably then: the longer the horizon, the better the returns. A five-year horizon will have a good chance of ironing out the dips and a ten-year horizon will have an even better chance.

Of course, ‘Black Swan’ events can and do appear but, from where we sit at the moment, 2020 is looking pretty good.

Ron’s Market Minute – Jan 3, 2020 Breaking News!!!  (No) Inflation!

Perhaps it’s too early in our country and the world’s history to understand exactly why inflation has remained so subdued for so long.  No matter how many pundits have cried for us to beware of impending inflation, it seems to be in hibernation.  I have a thought though and I’d like to share it with you. 

In the aftermath of THE financial crisis which affected nearly every American we have seen (more than usual) the bulk of households, businesses, and banks de-risk Big Time and work on cleaning up their balance sheets.  It’s true that banks may not have gone there of their own accord, but households and businesses have paid down debt in the years after the crisis.  The result has been less borrowing, investing, and risk-taking and these actions have led to less inflation and lower interest rates. 

Have a look at the chart below of household debt to GDP ratio.  It is (in my opinion) perhaps no surprise that the public has more confidence in their financial outlook.  It is also (in my opinion) somewhat amazing that the financial ‘press’ can’t seem to understand that it is NOT the size of the debt, but the size of the RATIO of the debt to income that determines financial wellness and comfort.  For example, Bill Gates may have significantly more debt than you or I, but his income is SO MUCH bigger than the debt, that it really doesn’t matter. 

It appears that this situation, where debt to GDP is not only lower than it’s been in quite some time, but that this trend may help keep inflation in check for some part of the next decade.  And this makes it a bit easier on the planners, as we work through the potential for a comfortable retirement for our clients. 

Here’s to a prosperous next decade!

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
www.denkinvest.com

This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email please contact us at 602-252-8700 or by e-mail at lindaw[@]denkinvest.com. If you are receiving this commentary via email and would prefer not to please let us know either by email or phone.

Ronald Denk is an Advisory Representative offering services through Denk Strategic Wealth Partners, A Registered Investment Advisor. He is also a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation. Information in this commentary is the sole opinion of Denk Strategic Wealth Partners. Past performance is no guarantee of future returns. All market related investments involve various types of risk, which include but are not restricted to, credit risk, interest rate risk, volatility, going concern risk, and market risk.

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*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.

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