a dramatic inflection point in U.S. economic history. The trillion
dollar government economic stimulus package, impending bankruptcies
in the domestic auto industry and unemployment rates approaching 10
percent are unprecedented events in our recent history.
appears that the Obama Administration and the Federal Reserve have
stabilized the financial markets and ended their free
fall. Chrysler and General Motors are going through the painful
reorganizations that probably should have taken place years ago.
Finally, the fallout from this recession is hitting middle America
in terms of slow business growth, state and local government budget
cuts and very few “help wanted” signs. Generally, economic
forecasters predict an end of the current recession later this year
with slow growth over the next two to three years.
have for most of us that are dealing with the everyday realities of
a job, family, bills and stretched resources? Well, let’s look more
closely at some of the economic indicators and how they might
relate to our financial situation.
U.S. Economy is most commonly measured by GDP- Gross Domestic
Product, which is the total measure of all goods and services
produced. The National Bureau of Economic Research (NBER), on
December 1, 2008, finally declared that the U.S. economy had been
in a recession since December of 2007. GDP for the first quarter of
2009 was -6.1 percent. The second and third quarters are forecast
to be slightly negative, with slightly positive growth in the
2009, what is your projected FGP- Family Gross Product, which would
include gross income, education/training and service to others and
the community? Do you forecast your FGP to increase for 2009? What
are some ways that you could increase your family’s output and
U.S. unemployment rate for the first quarter of 2009 was 8.1
percent and is forecast to increase to above 10 percent by year end
and remain at that level through 2010.
What are the prospects for your family members’ employment during
2009? Are any of your jobs at risk? Are there any prospects for
promotions? How are your family members improving their skills for
future job opportunities? Are resumes up to date?
The consensus forecast is that the Federal Reserve will continue to
keep short term rates low for the remainder of 2009 and well into
2010 to spur economic growth. The current Federal Funds rate is
Rates-As a borrower, you may see lower credit card, auto
and mortgage interest rates, however, the qualification for loans
may be tighter. This may mean higher down payments and tougher
terms. How can you most effectively reduce your interest costs in
2009? Can you payoff a significant portion of your credit card
debt? If you have an adjustable rate mortgage, would it make sense
to convert to a fixed rate mortgage at this time?
The S&P 500 Index is near breakeven for 2009, with continued
higher than normal volatility. (Investors cannot invest directly in
and index). Many stock analysts feel that the market has bottomed
out and will continue a gradual climb into positive territory for
the remainder of the year. Corporate profits will continue to be
under pressure because of the overall slow economic growth. Quality
companies with strong balance sheets may have the best growth
prospects over the next several quarters.
How are your investments performing during 2009? Is your portfolio
sufficiently diversified or do you have significant concentration
in one investment or company stock? Are you saving and investing
enough to meet your long term goals?
and begin to recover by the end of 2009. However, because of the
depth of the recession and business restructuring, we may be
plagued with slow growth and high unemployment over the next couple
of years. It is therefore important that we create our family
budgets and family financial plans. “Failing to plan is a sure plan
Wachovia Economics Group, Monthly
Outlook, May 13, 2000
“font-size: 10pt”>Michael G. Shinn, CFP, Registered Representative
and Investment Adviser Representative of securities and investment
advisory services offered through Financial Network Investment
Corporation, member SIPC. Visit
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