Way Back, When Radio Disk Jockeys Played 45-Rpm Vinyl Singles, The A-Side Of A Disk Was The Song The Record Company Was Promoting And The Other Side – The Flip Side – Held A Song That Sometimes Had An Equal Or Greater Impact. For Instance, The Flip Side of Queen’s We Are The Champions Was We Will Rock You.
When it comes to the economy and financial markets, flip sides can have significant impact, too. For example:
The flip side: Concern that share prices may not be sustainable. “The long, long bull market since 2009 has finally matured into a fully-fledged epic bubble. Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior…this bubble will burst in due time…,” wrote asset manager Jeremy Grantham of GMO in January 2021.
The flip side: Vaccines may not be as effective as many anticipate for two reasons: 1) Some Americans are reluctant to be vaccinated, and 2) Vaccines may not be effective against all strains of the virus.
Additional stimulus. A $1.9 trillion stimulus package is in the works, which could “…prevent unnecessary financial hardship and mitigate future economic risks,” according to Morning Consult economist John Leer.
That seems particularly important since employment gains have slowed. Last week, Carleton English of Barron’s reported, “All told there were 20.4 million workers receiving benefits under programs for the week ending January 23, a 2.6 million increase from the prior week. At this time last year, there were 2.2 million workers receiving benefits.”
The flip side: Too much stimulus could cause the economy to overheat, lead to inflation, and cause the Federal Reserve to raise rates. The bond market has already been pushing rates higher. Last week, the yield on 30-year U.S. Treasuries rose above 2 percent for the first time since February 2020.
The flip side: While many agree U.S. infrastructure needs repair, the cost may be paid through higher taxes. There is ongoing debate about whether tax increases impede or accelerate economic growth, according to Jim Tankersley of The New York Times. In addition, government spending of this type is another form of stimulus, which could heat up economic growth.
Last week, Colby Smith of Financial Times reported numerous economists have increased U.S. gross domestic product (GDP) growth estimates for 2021. Estimates ranged from 5.9 percent to 6.3 percent.
Throughout history, inventions and new ways of doing things have changed the world:
It would have been difficult to understand or estimate the long-term value of these innovations. It’s possible some of today’s innovations could have similar impact. One is machine learning. Machine learning uses algorithms to turn a data set into a model that can improve our understanding of a topic. For example, machine learning is being applied to:
“There is no recipe, there is no one way to do things – there is only your way. And, if you can recognize that in yourself and accept and appreciate that in others, you can make magic.”
--Ara Katz, Entrepreneur
Marilyn Suey is a registered representative with, and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Strategic Wealth Advisors Group, LLC, a registered investment advisor. Strategic Wealth Advisors Group, LLC. and The Diamond Group Wealth Advisors are separate entities from LPL Financial. CA Insurance License #0E01981.Securities offered through “Your B/D Name Here”, Member FINRA/SIPC.
* These views are those of Peak Advisor Alliance, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.* All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.* Past performance does not guarantee future results. Investing involves risk, including loss of principal.* You cannot invest directly in an index.* Consult your financial professional before making any investment decision.* Stock investing involves risk including loss of principal.
https://www.barrons.com/articles/the-stock-market-keeps-rising-the-reasons-to-be-hopeful-are-also-the-reasons-to-worry-51613179045?refsec=the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/02-16-21_Barrons-The_Stock_Market_Keeps_Rising-The_Reasons_to_be_Hopeful_are_Also_the_Reasons_to_Worry-Footnote_3.pdf)
https://www.barrons.com/articles/jobless-claims-continue-their-slow-climbdown-51613053832?mod=article_inline (or go to
https://www.washingtonpost.com/transportation/2021/02/11/biden-senators-infrastructure/ (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/02-16-21_TheWashingtonPost-Biden_Meets_with_Key_Senators_to_Start_Bipartisan_Talks_on_Infrastructure_Spending-Footnote_10.pdf)
https://www.nytimes.com/2019/12/05/business/Elizabeth-Warren-tax-increases.html (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/02-16-21_TheNewYorkTimes-Could_Tax_Increases_Speed_Up_the_Economy-Democrats_Say_Yes-Footnote_11.pdf)
https://www.ft.com/content/a6d89494-9fac-49a8-8b0a-4f3f1870ace1 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/02-16-21_FinancialTimes-Markets_Brimming_with_Investor_Optimism_on_US_Economy-Footnote_12.pdf)