November 2023 Economic Tug-of-War

If you were like me as a kid, you may remember the epic tug-of-war battles by the big oak tree over a mass of mud.?? The winner got to stay clean, albeit with a few rope burns, and the losers, well, they got that sticky mud all over them.? It was all about bragging rights, but in the long term, we all knew we would be clean before long.?? We would pull with everything we had, teasing each other as the rope strained.? Ultimately, it didn’t matter; a comforting shower washed away the evidence of our epic struggles.??

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The economic data across the nation and world seem to be in an epic struggle, pulling with all their might, but depending on your current situation, the long-term effects may not be as simple as a quick shower.?

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The economic Tug-Of-War:

?When we see headline inflation leveling, employment numbers continue to come in strong, and even the first set of largely upbeat corporate earnings in about a year we start to feel optimistic and wonder why our portfolios are not rising. On top of that, the Federal Open Market Committee seems to have paused in its unprecedented and massive ratcheting of rates higher.? Even the housing market has not slowed down all that much yet.?

When you “dig a little deeper,” you realize that many clients of U.S. companies are located overseas and vice versa, many of our suppliers are also overseas.? Europe is officially in a recession; the Chinese economy is all but crumbling, and Norwegian and Swiss manufacturing continue to move downward.? Banks hoard cash while their asset base (treasury bonds) continues to trend downward, and both consumer and corporate creditors grow weaker.?? The consumer tells us they still feel confident, but their balance sheets tell a different story.? Hence the “Tug of war.”

Treasuries, Consumer staples companies, and utilities, the traditional “safe havens,” have all performed miserably.? Gold cannot seem to stay over $2,000 an ounce.? Earlier in the year, Computer Chip companies and anything related to Artificial Intelligence screamed higher. Still, this rally was primarily constrained to seven mega-cap companies while smaller innovation companies languished.

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Geopolitics:

The geopolitical atmosphere probably has not been this tense since WWII.? The imagery from around the world is horrifying.? Some market participants believe this is all just a distraction.? Over my career, this has not been my observation—events around the world impact markets, prices, and market sentiment considerably, in my opinion.?

The famous last words like “This time is different” gets a lot of bad press.? It is almost always true, however.? Things are different. ?We are working with vastly different technologies and general advancements.?? Artificial intelligence has changed the face of not just the business world but everything in the world.? Whether you look at manufacturing or warfare, we do things much differently than we did twenty or even five years ago.? The younger generation has had a different set of experiences than the older generation, meaning they feel differently about many things that influence their decision-making.? This is why we do not just work in a complicated marketplace. We work in a complex marketplace.

So yes, geopolitical events, politics, wars, and threats all make a difference in the investing landscape.? Israel is at war against terrorists on several fronts, Russia is at war with Ukraine, sanctions are impacting supply chains, threats against Taiwan, and Ethiopia is damming the supply of water to the Nile, choking the lifeblood of the Egyptian economy.? These are just a few of the issues where we need to dig a little deeper and discover how to position ourselves to profit without violating our own values or risk parameters.??

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?Positioning Yourself to Profit:?

The past twelve months have been incredibly frustrating for traditional conservative investors who have counted on portfolios heavily weighted towards bonds and other traditional fixed-income instruments, Utility company stocks, and Consumer Staples.?? Aggressive investors who favored smaller cap businesses and companies heavily involved in new innovative technologies have also not fared well.??

The brave few who invested in the so-called “Magnificent 7” mega-cap stocks with no or little exposure to fixed income or those who had diversified into structured products or annuities were spared from what was, for many, significant losses.??

The moral of the story from the past twelve months: Recent events do not change everything we know about historical diversification and concentrate on the top seven names. Instead, allow for more than just straight stocks and bonds to add to your diversification strategy. ??Add the appropriate amounts of annuity holdings and structured products with income and downside protection.? Where we see investors self-destructing is when, after what seems like a very long time, they are not seeing the results from their strategy that they want.? Often, they choose to switch plans at precisely the wrong time.?

This note is not meant to be taken as personal investment guidance.? Each situation is different, and an in-depth conversation with a qualified professional is my best advice before adjusting your plan.? My encouragement is to stick to your long-term (five years or more into the future) strategy and remember your goals unless you have a significant life change that causes you to need to adjust that strategy.? ?

?If you would like to learn more about how to create your paycheck protection program in retirement so you are not worrying about running out of money or not being able to live your best life, reach out to us at the Contact Us section of?Guardianrockwealth.com ?or by texting the word LIFE to 321-421-5213?

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This note is not investment guidance for you; it is information and opinion only.?

Define your outcome and allow a skillful artisan to help you create it.

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Please keep in mind that this note is our opinion from a broad perspective based on over three decades of money management experience and is not personal investment advice.

For more information and a copy of the Amazon Best Selling Book Build A Life Not a Portfolio, reach out to us?HERE? or text the word LIFE to 321-421-5213

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Talk soon,

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John

Phone: (561-) 327-4646

Email:?[email protected]

?John Browning, MBA, and CSA?

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* Securities and investment advisory services are offered through Guardian Rock Wealth Investment Mgmt. Inc. (GRWIM). GRWIM is a wholly owned subsidiary of Guardian Rock LLC. Neither of these entities provides tax or legal advice. Guardian Rock has offices in Palm Springs (West Palm Beach), & Port St. Lucie Florida, Pinehurst, North Carolina, and Lisle, IL, and services individuals across the United States.??

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