On November 13th, Triad Financial Advisors were happy to join other institutions in sponsoring the Greensboro Chamber of Commerce’s Economic Luncheon. The featured speaker was Tom Barkin, President of the Federal Reserve Bank of Richmond.
The forecast was largely upbeat, with Mr. Barkin citing consumer confidence, strong housing starts and strong auto sales as leading indicators of continued economic growth. He also said he expects the current low interest rate environment to continue for the foreseeable future.
The main risk to the economy he cited was the current political polarization and uncertainty regarding trade policies and regulation. While he noted companies had not yet started significant scaling back on investment, continued uncertainty could result in a loss of confidence and reduced spending. In other words, consumers could talk themselves into a recession.
Mr. Barkin also addressed a question regarding the increasing Federal deficit. The U.S. government deficit surpassed $1 trillion this year — the first time since 2012. The deficit as a percentage of GDP has increased to approximately 80% and could surpass 100% in the next few years if fiscal policy remains accommodative. While these debt percentages are nowhere near the levels of Greece, Italy and Japan, the deficits will one day need to be addressed, most likely through higher taxes and decreased government spending.
If the U.S. continues to ignore the deficit, the risk is that foreign governments lose faith in the creditworthiness of the U.S., potentially causing them to sell their U.S. debt holdings and drive our interest rates higher.
To our clients who are at or near retirement, you need to consider the possibility that future government benefits might be lower than currently anticipated. In other words, you might not have as much saved as believed.
We reiterate our message to live with intention. Things to consider include: saving more of what you earn, investing more of what you save and potentially be willing to accept more risk in your investment portfolios.