In my previous article which recounted the first part of an extended conversation with Chicago area financial planner, Thomas Howard, Chairperson of the Illinois Financial Planning Association, we focused on the investment environment in general. Today, we focus on what Tom thinks may be the biggest mental, emotional challenge for investors today: the politicians in Washington, D.C.
Tom reports that his clients are very wary and anxious these days, and much (if not most) of the focus of their frustration and angst can be found in the very small area between 1600 Pennsylvania Ave. and the Capitol Building, too few of whom have distinguished themselves during the past 20 months! None of Tom’s clients have any positive feelings about what has gone on in our Capital; and many have felt embarrassment and anger as the world watched our government become so dysfunctional and polarized that the U.S. lost its “Triple A” credit rating for the first time in history.
Adding to their collective anger is the fact that, following their so-called “agreement”, the equity markets have collapsed and Treasury Securities have rallied beyond imagination, taking the ten-year note (ever so briefly) to a yield below 2%. Since that was the very opposite of what was expected (and logical), many investors have been made to feel that they’ve been thrown down a rabbit hole into the proverbial “Wonderland” of Alice – where things are topsy-turvy and nothing is as it seems.
There are numerous related “disconnects” which are apparent to most everyone, except (evidently) those elected to national office. For example, the monthly “C.P.I.” figure calculated by BLS (Bureau of Labor Statistics) must draw its data from a parallel universe, because the result it presents seems very far removed from what finds in the grocery store, gas station, and restaurants. Many clients, especially those on Social Security and fixed income, are getting squeezed very tightly by the huge gap between income and expense. It did not always seem to be that way. Most folks label these days as much, much more challenging… even “unfair”.
In point of fact, many of the statistics issued by the government, and upon which investors depend, regularly seem suspect. Aberrant numbers issued in one month (which move the markets widely one way or the other) are dramatically “adjusted” the next month. I commented to Tom that a number of commentators I follow have expressed genuine frustration and incredulity that the government regularly fails “to get it right”, often causing unnecessary dislocations within the financial markets.
We concluded our conversation by agreeing that many financial advisor clients, as well as investors in general, have become emotionally stressed by ongoing market volatility, which has been compounded by fears caused by worsening economic data (such as the abysmal September 2nd BLS “Non-farm Payroll Report”) and a seemingly ineffectual federal government, whose billions of dollars of “stimulus” expenditures seem to have been largely wasted.