For many of our clients, we recently changed a few of your investments. If you’re curious about what we’re thinking, and why we made a change, now is a perfect time to pick up the phone and call your financial advisor.

We have a debate going on right now in our industry. One says, “Damn the torpedoes, full speed ahead!” and the other says, “you are a moron,” prepare for a recession.

Robot Pic

Over the short term, one or the other will be correct.

Over the long term, which is the only one that matters for you, confidence wins. By investing your money in solid companies and sticking to your financial plans you will be rewarded over your lifetime.

In the mean time, we’ve made a tactical decision that helps us guide our ship with a little less than “full speed ahead” just in case we have troubling seas.

Let’s look at the two sides of the decision.

Damn the Torpedoes, Full Speed Ahead!

Our economy is strong. American consumers have more wealth, more savings, less debt and more confidence than we have had in a very long time. Unemployment is low—and in many cases lower than even the official unemployment reports might show. Equity markets are high and still on a longer-term uptrend, in spite of the recent trade war chaos. Indeed, an optimist (like me) looks at the quick rebound from the quick declines as a sign of strength. Importantly, we have limited investment choices. Interest rates are low—very low—so where else (other than in companies) will investors look to get a return? For these reasons, “full speed ahead!” may be a long-term prudent decision. But that’s not the whole story…


You Are a Moron, Says a Robot Voice

Our economy is fragile. The world is full of negativity. Speculation is rampant. US Treasuries may soon pay negative interest rates. For years, other countries bonds have paid negative interest rates. Investors are guaranteed to lose (only a little) money if they buy a negative-interest-rate bond. This only makes sense if investors are afraid they’ll lose more in every other type of investment. This is different; this has never happened before. You may never see it happen again.

Plus, US stock prices are high compared to their earnings (Price/Earnings, or P/E). It’s been 10 years or more since our last recession, which, by many measures, is the longest EVER. And it just feels like we are due for a correction.

These emotional arguments sound logical, almost like a robot voice, saying “you’re a moron” if you think the next 10 years are going to be as good as the last 10 years.

So what do we do now?

So what to do, when we agree with both sides of an argument?
First, we look at our “barometer.” As shown below, on the day I wrote this, the “Athena behavioral market barometer” was normal: some good news, some bad, mostly normal.

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Next, we look to our other research team who recommends we make a change. So, in a very sophisticated way, we took some risk off the table.

We made a tactical decision in our “Foundation Income” portfolios held at E*TRADE Advisor Services. For the details, contact your financial advisor. For the overview, think of us as making the conservative portion of your investments a little more conservative.

On the other hand, we believe equities will continue to be the long-term generators of wealth for you and for us. Thus, in growth-oriented, long-term portfolios you may see little or no change, depending upon your unique situation. This way, we are neither “a moron” nor are we giving up the ship. We are your humble captain, at your service, putting your interests ahead of our own.

Soon, we’re going to host a Lunch and amp; Learn event on “Investing in Case of a Recession” so look for the announcement. If you’re interested, please send us a note so we can make sure to save you a seat.

About the author

Karl Frank, Certified Financial Planner ®, MSF, MBA, MA, is the President of A&I Financial Services LLC, a local business that specializes in wealth management, insurance planning, and retirement planning. Karl cares for business owners and the businesses that care for them. Learn More about Karl.