Labor Day, September 2, gave rise to thoughts about the meaning of work. Most associate work with “breadwinning,” a job, profession or pursuit for which one is paid. There is work for which one is not paid, homemaker, parent, caregiver, volunteer, etc. These have spiritual, meaning and purpose-related rewards. If you are pursuing a passion, something you get lost in, losing track of time, it may not even seem like work.
For many, a job, the proceeds from work, a dependable and adequate paycheck, is the major source of lifestyle financing and peace of mind in one’s ability to support self, family and others that depend on you. Surplus work income, after taxes, expenses and debt reduction, is invested for the future. That’s where “time” is important.
Current data has recession indicators signaling a potential economic slowdown precipitated by slowing growth overseas and the trade battle between the U.S. and China. So far, consumer spending, about 70 percent of GDP, is holding up. But if workers get concerned by headlines, stories of layoffs and recession talk, they may pull back. However, analysts, pundits, economists and money managers debate the health of America’s economy and how long our long expansion can continue. Interest rates have come down in response to central bank easing, which helps debtors who can refinance. Borrowers are less likely to increase debt if they sense a looming recession.
People are also likely to retrench if something threatens their livelihood, whether creative destruction, recession, regulation or legislation. Some of the things being proposed such as the Green New Deal would have a major impact on jobs. Tariff wars cause job jitters. Inflation causes distortion in prices all across the spectrum, as does “deflation.” Copper prices are one of the recession indicators causing concern as the metal is considered a barometer of economic health in homebuilding and commercial construction. Prices are down 13 percent in the last six months. Conversely, gold is up over 20 percent since the escalation of the U.S.-China trade fight in May. (CNBC, 9/2/19)
Labor Day was my 52nd wedding anniversary which reminded me of the gift of time when it comes to life and good fortune. That applies to personal financial planning and investing, where time and patience also come to the fore.
Reading the semi-annual report for a leading mutual fund group played into the above theme. For a diversified global fund, $10,000 invested a decade ago grew to $23,577, whereas the CPI increased to $11,984. The point: money was invested at a time of significant investor distress and worry, but left alone, dramatically eclipsed a rising cost of living. You see similar patterns in most stock funds, ETFs, index funds, etc., growth of one’s nest egg and future buying power.
How did the fund group’s gold fund do? Ten thousand dollars invested in 2009 dropped to $7,767, with inflation at $11,984. Gold often turns out to be more of a short-term speculation, although it can serve as a long-term hedge.
There will always be turmoil in the world and controversy and challenges at home. We will get a recession at some point, followed by a recovery. Performance in investments is not guaranteed and 10-year returns reflect a long running U.S. bull market. Have sufficient safe and low volatility reserves to ride out any storm, including a slide in investment values and even a job reverse.
But you can bet that given the gift of time, America will continue to grow and progress, as will the world at large despite ups and downs, political swings and turmoil. A long-term diversified investment portfolio is likely to reflect that growth. The money is likely to be there to celebrate milestone birthdays, family events, anniversaries, sale of a closely-held business, retirement in true style. Have a great fall!
Lewis Walker, CFP®, is a financial life planning strategist at Capital Insight Group; 770-441-3553;firstname.lastname@example.org. Securities & advisory services offered through The Strategic Financial Alliance, Inc. (SFA).