While Federal Reserve Chairman Jerome Powell believes the U.S. economy is in good shape heading into the 2019 holiday season, top Wall Street firms beg to differ. Powell cited a strong labor market and consistent consumer spending as signs of a healthy economy, although the Fed’s move in October to cut its benchmark interest rate for the third time this year might seem to be at odds with that statement. Wall Street may have picked up on that, because they’re certainly singing a different tune; in fact, an advanced computer analysis of public statements made by companies in the financial sector has revealed Wall Street firms are talking about a recession much more frequently than companies in other industries. So what is it that has them so spooked, and what could it mean for your retirement investing future?
Potential policy changes are causing investors to feel uncertain about the future, not just in the U.S., but around the world as well. Chief among investor concerns are the outcome of Brexit and the ongoing trade war between the U.S. and China. Public announcements about these events have triggered fluctuations in global markets, and it stands to reason that investors will continue to feel uneasy about these and other upcoming policy changes until world leaders start making some concrete decisions about the future. Wall Street is no doubt picking up on the uncertainty in the air and tempering their expectations for a continuing Bull Market.
Slower Than Expected Economic Growth
Although the U.S. economy continues to grow steadily, it’s failing to measure up to the meteoric rise it experienced post-recession, which could signal a slowdown in the near future. 2019’s third-quarter GDP growth was down slightly from its second-quarter growth and declining business investment could indicate U.S. corporations are tightening their belts in anticipation of future economic troubles. While it’s currently too early to call these numbers an economic slowdown, they may predict a larger overall trend that could mean our seemingly endless Bull Market is reaching its conclusion.
Election Year Uncertainty
As we head into an election year, the stock market is bound to experience a series of shakeups. Election years are always volatile for the stock market, especially if investors anticipate a changing of the guard that could be a precursor to big changes in economic policy. With some candidates espousing a strict regulatory agenda and higher tax rates for the wealthiest Americans, Wall Street’s biggest players are likely starting to get nervous about the outcome of next year’s election. Only time will tell if their fears are well-founded, but for now, it seems they’re sounding the alarm regardless.
Whatever your opinion of Wall Street, there’s no doubt that they follow the economy more closely than almost anyone else in America. If they’re talking more about the possibility of a recession in the near future, it’s probably a good idea to listen up and adjust your retirement planning strategy accordingly. The stock market is always volatile, and those who are in or near retirement may not have the time to recoup their losses if the economy takes a nosedive in the next few years. If you’d like to hear more about alternative investments outside of the stock market that protect your principal in the event of a crash, head over to the Crash Proof Retirement Educational Events page and sign up for the event nearest you!