Long time clients of ours have heard our mantra of “when the Federal Reserve acts, the first impact is on bonds, the second is on stocks, and finally the real world.”
Last week we sponsored seminars with Candice Tse of Goldman Sachs Asset Management. Ms. Tse is a principal in Goldman’s Strategic Advisory Solutions, a unit of the firm that develops economic and market outlooks and recommends action steps to best take advantage of the opportunities offered.
Goldman’s view, like ours and many others, is that financial asset prices are elevated and future returns will be muted. The chart below shows how financial markets have performed since the credit crisis and global central bank efforts to spur growth. The markets responded, but the advances have been far in excess of those recorded thus far in fundamental economic activity.
The big positive is that economic activity around the world continues to move forward. As such, prospects for a recession in the reasonably-near future are low. Following, in the absence of some exogenous event, we do not see a bear market on the horizon – regardless of how many pundits believe we are “overdue” for a major setback.
The downside, as noted above, is that much of the good news appearing in global economies is already reflected in equity prices. Market gains in recent years have been steep and relatively narrow. The path ahead will be flatter.
What does this mean for investors? More patience will be needed, and one’s tolerance for risk will need a check-up. We’ll expand on these thoughts in our upcoming quarterly Economic & Market Commentary. In the meantime, schedule an appointment with your Security National Bank Wealth Management Advisor to make sure you remain in position to achieve you goals in an environment a little less friendly than that of the last few years.
Graphics by Strategic Advisory Solutions Department of Goldman Sachs & Co., LLC. Copyright Goldman Sachs & Co., LLC All Rights Reserved.Back to Articles