Folks who attended our 2023 Q3 Market Outlook Webinar heard a much more positive message about the economy than the one you might be hearing on social media and cable news. Matt Wilson, Chief Investment Officer and President at Keen Wealth, always follows the latest data towards a no-nonsense picture of where we are and where we could be heading. On today’s show, we discuss why we’re cautiously optimistic about the rest of the year and answer some follow-up questions from webinar attendees.
1. What is the latest strategy on holding I bonds versus treasury notes or CDs?
I bonds are government-issued bonds whose yield is tied to the rate of inflation. They had a moment in the spotlight last summer when they were earning over 9% at, arguably, the height of concerns about inflation and the potential for a recession. But while I bonds aren’t a flash-in-the-pan craze like meme stocks, the strings attached to these bonds deflate some of the hype. You can only buy $10,000 worth of I bonds, direct from the Treasury’s rather cumbersome website, and there are some complicated rules around when you can sell them. Also, those splashy rates that grab the internet’s attention aren’t locked in for the life of your investment – they reset every six months. Right now, I bonds are yielding around 4%, which, from a short-term perspective, is less than you’d earn from interest on a money market account at many banks. U.S. Treasury bonds are yielding almost 5%.
Perhaps the bigger point here is that higher interest rates are creating more options for folks looking to diversify in the conservative part of a balanced portfolio. But talk to your advisor before you buy bonds or CDs to ensure you’re making investments that are in sync with the rest of your financial plan.
2. Is a potential recession baked into current market fluctuations, or is a recession just not coming?
I have to pat Matt on the back here! As up and down as the markets and the overall economy have been in the past year or so, he’s consistently told our audience that recession concerns were overblown. That’s not to say higher prices and volatile investment returns haven’t been a challenge for many folks. And, in fact, according to the most commonly cited metrics, the U.S. did briefly slip into a recession last summer. But as Matt and the rest of my team at Keen Wealth have pointed out time and time again, not all market pullbacks are the same. With job numbers still strong, inflation continuing to decline, and the U.S. markets up almost 18% for the year, it is highly doubtful there is a 2008-2009 style Great Recession in our near future. Right now, it may be a good idea for investors to work with advisors who can help them take advantage of today’s volatility to increase their earning potential tomorrow.
3. What is your projection for the next two quarters?
Good as he is at what he does, what Matt can’t do is predict the future. Even in the best years for the markets, returns come in fits and starts, not in a straight line. The best any advisor can do is assess the current numbers, estimate a range of possibilities, and present their clients with the best possible options for their specific financial goals. As those estimates evolve from quarter to quarter, our planning process evolves with it.
So, while our current range of estimates does point towards a positive end to the year, anyone who throws out one “definitive” number is just guessing – and probably trying to get you to click on something! I’d encourage folks who want a clearer understanding of how Keen Wealth analyzes the markets to watch Matt’s webinar, where he explains our methodology and the numbers we’re watching as we head into the second half of the year.
4. How will plans for student loan forgiveness affect the economy?
This month, the Biden administration is launching a website for its Saving on a Valuable Education (SAVE) Plan, which aims to eliminate $39 billion in debt for over 800,000 borrowers.
While $39 billion is not an insignificant amount, it’s a drop in the bucket of our $20 trillion economy. Plus, loan forgiveness is only an option after folks have been making payments on their loans for 25 years, so it’s not like this $39 billion is just going to vanish from the books overnight.
It’s also worth noting that President Biden’s moratorium on student loan repayments ends this fall for many borrowers. That’s going to pull about $185 billion in spending money out of people’s pockets, but again, it’s a small amount relative to the overall strength and size of the economy right now.
Do you want to be alerted when Matt schedules his next Market Outlook webinar? Click here to sign up for our mailing list and we’ll let you know about all of our educational events, as well as when our latest blogs and podcasts are published. And if you have a question you’d like us to tackle the next time we open our mailbag, you can email Keen Wealth right here.
Bill Keen is a financial advisor with nearly 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
KWMG, LLC’s dba Keen Wealth Advisors (“company”) is an SEC Registered Investment Advisor located in Overland Park, KS. The company and its representatives may only conduct business in those states where registered or where excluded/exempt or from licensure. For registration information please contact the SEC or the state securities regulators for the states where the company is notice filed. A copy of the company ADV is available upon request. Advisory services are only offered to clients or prospective clients where the company and its representatives are properly licensed or exempt from licensure. No advice may be rendered by the company unless a client service agreement is in place. This information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy and is for illustrative purposes only. Clients and prospective clients must consider all relevant risk factors involved with each strategy, including costs or fees, and their own personal financial situations before trading.
The views outlined in the book, Keen on Retirement Engineering the Second Half of Your Life, are those of the author and should not be construed as individualized or personalized investment advice. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted.
The Amazon Best Seller ranking listed on marketing materials is specifically referring to Best Seller rankings for the Kindle Top 100 Paid Lists under the subcategories of: Budgeting and Financial Risk Management, based on data as of September 5, 2019 and the second edition under Financial Risk Management on October 26, 2022. Amazon rankings although relevant on how a product is selling overall doesn’t necessarily indicate how well an item is selling among other similar items or similar item categories. Amazon may choose the most popular categories or subcategories within which an item has a high ranking to determine its best seller rankings. These rankings are updated hourly and as a result, should be expected to fluctuate as such. Keen Wealth Advisors and Amazon are not affiliated entities.
The Steve Sanduski Advisor Network, Belay Advisor, LLC and other third-party contributors to our blogs and podcasts are not affiliated with Keen Wealth Advisors.
For additional details on Keen Wealth Advisors, please visit https://www.keenwealthadvisors.com/important-disclosures.