At the end of a long smooth flight with virtually no turbulence it can be disheartening to fly into an airport like Ontario California and be hit with “Mountain Wave Activity”. According to the FAA, this sudden turbulence occurs frequently at airports located near mountain ranges in the Western USA.
2013 was a very smooth flight for the US stock marketii. From July through December market volatility (turbulence) was almost nonexistent. Consumer and investor confidence soared as market total return reached numbers unseen since the previous millennia.
Some would argue that the Federal Reserve’s stimulus is keeping the market aloft and when they remove the stimulus the economy will crash. The Fed is attempting to land this economy gently, but they are approaching an airport likely to experience mountain wave activity and for which the pilots have literally no charts. No one has ever landed at this airport before, so reliable instruments and clear visuals are absolutely crucial for them to get it right.
Just like weather causes challenges for airline pilots, the weather has had a major impact on the market and a minor impact on the economy. Many of the economic statistics currently being released (the “instruments” which the FED is using to navigate this landing) have been negatively impacted by the severe weather experienced throughout the country. The headlines created by many of these reports falling short of expectations may sound dyer, but bad weather is nothing more serious to the economy than a bit of in-flight turbulence during a cross-country flight.
The bad news is, we may be in for a rough landing. It may make some passengers puke. As your LPL Financial Advisor, it’s my job, just like a flight attendant, to keep you safely buckled in your seat for the landing.
But the good news is this: In my opinion, America builds the best aircraft. We do it with some of the best engineers and workers in the world. Likewise, our economy is the largest of any country and nearly twice the size of the next largest countryiii. And while China assembles our iPhones, we are constantly expanding the envelope of technology, developing new products and improving our productivity.
So consider this your warning: “We’ve begun our final descent. Please return to your seat and fasten your seatbelt.”
iThe opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
ii For purposes of this article the US Stock Market is measured by the S&P 500 Index.
iiiData as of 2012 and ranked by the United Nations, the International Monetary Fund, the World Bank and the CIA World Factbook and listed by Wikipedia at http://ht.ly/u2AYM.
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