The Future in Aging
They say that there is no future in aging? Just ask Mr. Biden & Mr. Trump who are in their older years and are vying for the most powerful position on earth.
As January 2024 comes to and, one thing is clear: whoever becomes the next POTUS will have more than their share of challenges to confront such as budget deficits and swelling national debt.
With little focus on a decrease in spending on both sides of the aisle, tax increases are gaining in popularity. Typically, the cure for deficits is higher taxes and lower government spending, but this could weaken the economy and corporate profits in the future.
It is estimated that the U.S. ran a deficit of more than 8% of Gross Domestic Product (IMF estimate) in 2023. It was 3.7% of GDP in 2022, thus a huge increase in the deficit in 2023.
If one were to put current circumstances in a blender, it would portend lower growth which is bad for stocks, and lower interest rates which is good for stocks.
According the Federal Reserve, the Core Personal Consumption index eased to 2.9% in December of 2023, the lowest since 2021. Spending posted the biggest back-to-back increases in a year. These are good numbers. Even though the Federal Reserve would like to see inflation lower, the trend is good. Remarkably consumption steamrolls ahead. This consumption continues as credit card debt reaches all-time highs. As of September 2023, the US’s credit card balances are $1.079 trillion (about $3,300 per person in the US), according to the Federal Reserve Bank of New York. Interestingly, Alaska has the highest average credit card debt at $8,026. $7,338 and those with college degrees are the most indebted at $7,940 average per capita according to the New York Fed.
Economic growth is the most crucial element for equity returns regardless of what is happening in the slope of the yield curve. If the U.S. economy can avoid a recession, it will clearly be better news for the stocks.
It is incredible that the “Magnificent Seven” technology stocks are now worth more than the combined stock markets of Japan, Canada, and the U.K.
The AI craze might continue for a while and indeed it is a transformative technology. At some point these stocks will break on overly optimistic expectations so it is particularly important to be mindful that trees do not grow to the sky.
Interest rates have eased, and bonds have shown good returns in the last twelve months. It is safe to say that bond returns may continue to deliver their coupons.
Our portfolios of multi-strategy funds continue to bring solid results and offer a good place to invest to smooth the path of returns.
Real estate remains an interesting asset class, but selection of projects is critical. The commercial environment is challenged in major metro areas – aggressively financed projects of any kind will see weakness in this environment. Additionally, well over a trillion dollars of real estate debt will come due in the next two years. This will place a great deal of stress on the assets class and the lenders. As 2024 unfolds, the challenges to those in our industry are plentiful. At the end of the day, we are here to counsel you on your financial life. Obviously, this role can affect many other aspects of your life.
As Albert Einstein said, “Try not to become a man of success, but rather try to become a man of value.”
Every day we strive to be of value to you, our friends, and clients.
Thank you.
As ever,
Seymour W. Zises
