Acrophobia, according to the reliable website Dictionary.com, means “a pathological fear of heights.” While we are not necessarily qualified to call what is being felt among many investors today “pathological,” we are certainly qualified to understand the fear we see and hear from clients, friends and radio callers. It is the fear that the market is so high that it is dangerous to stay invested, lest a crash is right around the corner. While that possibility exists every day, we are reasonably confident that a “crash” is not imminent.
Just as words mean things, market actions reflect conditions in the economy, the country, and the world. For the last year, our economy, our country, and a large portion of the world are prospering. Prospering, in fact, in a way we have not seen for many years, and almost certainly not since before the terrorist attacks of 9/11/2001.
We understand the underlying reasons for widespread current prosperity, so we have not joined the acrophobic masses. The simple truth is that our economic good times are the result of good economic policies. It is not an accident, either, as the same policies that drove us into prior periods of economic growth and prosperity have been recreated by the current Administration.
Historically, tax cuts have always resulted in economic prosperity. It matters not what political party is responsible for passing the cuts; it just works. Presidents John F. Kennedy, Ronald Reagan, and George W. Bush all shepherded tax cuts through Congress, and each time the result was increased economic prosperity, with improved government revenues. So it is today with the recent President Donald J. Trump tax cut package. Since the implementation of the new law on January 1, 2018, the market has gone on a tear. It was already headed up, and is waiting for more good news. Whenever good news is received, the market responds as anticipated.
“How long will it last?” “Is it too high?” “Will there be a pullback, or even a crash?” No one knows, but we can assess these possibilities. Right now, a pull-back of any kind could be deemed a probability, as it has been a long time since we have had one. However, we believe that it will be preceded by more advances. The new economic policy has not even been fully implemented yet. New withholding tables were just published by the IRS, and will have to be used by employers by February 15, 2018. The resulting larger paychecks will help to further stimulate our economy, which is 70% driven by consumer spending.
We can’t form any other logical conclusion than that continued prosperity awaits, both economically, and for the markets. Sure, we continue to have problems as a nation, but so long as our momentum is strong, more good results should follow.
Investors should always be cautious, but each of us has an obligation to ourselves and our futures to make the best decisions we can. Very often, good decision-making results from seeking the assistance of professionals. As fee-only Certified Financial Planners, we can assist you in overcoming your fear and making sound investment decisions. In the words of then-candidate Donald J. Trump, “What the H___ do you have to lose?” Love, hate, or remain indifferent to the man himself and his sometimes-irritating style, from a policy standpoint he is a refreshing and comforting policy leader.
Van Wie Financial is fee-only. For a reason.