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January 2016

The outlook and predictions for 2016 are, frankly, awful. Between oil prices dropping, China’s repeated troubles, and the market opening only to drop 400 points, no one seems to have anything good to say about 2016. But how accurate is all the doom and gloom? Last December, Richard Bernstein published an article in Financial Advisor Magazine titled “Mute the TV,” in which he said “…2016 might be a difficult year for investors…not necessarily for investing.”[1] Again, it could be a hard year for investors, but not for investing.

Why will it be so hard to be an investor, and why is the best advice you’ll get “mute the TV”? Because the Presidential and Congressional races are this November and everyone is campaigning hard. People are stirred up and there is a good change we’re going to be seeing negative ads, and their many gloomy predictions. Their goal to be elected, the candidates are all saying the same thing: “Be scared – things are very bad – but trust ME. I’ll fix it.” Fact checkers have already found, though, that every single one of the candidates has at least exaggerated the truth, if not outright lied, and we can expect that to continue. Mute your TV, because we need to focus on the facts, on what’s actually going on, and not that we’re being told is going on.

The problems touted – the deficit, worker compensation, and commodity price drops – aren’t as tragic or dangerous as it is implied. During the Great Recession, the total deficit was at 10% of the US GDP; expenses were high, particularly the safety net, and revenues decreased with more people out of work and paying fewer taxes. Today our deficit is at only 2.5% of GDP, better than average in the long-term. The National Federation of Independent Business released the results of a survey to US small businesses that found hiring intentions for 2016 were higher than normal as well. To accompany this, hourly wages have increased 2.3% in the last 12 months. Lower oil prices (and other commodities), higher wages, and low unemployment (5.0%!) has meant that consumer purchasing power is increasing, and the value of the dollar continues to rise. These are all very good signs for the overall health of the country – and for the American consumer.

It comes down to looking at the facts, and making your own decisions about the hard-and-fast numbers, not letting candidates or pundits talk you into “their” facts. My favorite saying is Daniel Patrick Moynihan’s “You are entitled to your own opinions, but not to your own facts.” Stay educated and focused on fact, and 2016 might have a lot of potential.

 

[1] Bernstein, Richard. “2016 – Mute the TV.” Financial Advisor Magazine. Dec. 17, 2015. retrieved from: http://www.fa-mag.com/news/2016-mute-the-tv-24293.html

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