Managing Economic Uncertainty in 2020 - Blog Popular Bank
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01.15.2020 /

Managing Economic Uncertainty in 2020

With Joshua Harkey, National Head of Popular Private Client

It’s a new year, and for investors, diverging indicators from tepid global growth to domestic politics are fueling economic uncertainty.

In many ways, 2020 is signaling a positive economic performance, drawing on last year’s record-breaking momentum, notably a raging bull market and chart-topping consumer sentiment. Economists largely agree that the Goldilocks economy will persist. According to the Federal Reserve, forecasts suggest that Gross Domestic Product will grow between the ideal range of 2% and 3%. Unemployment is expected to remain at a healthy 3.5%.

Despite these cautiously optimistic projections, stress fractures are deepening. Ongoing geopolitical and global trade policy volatility continues to persist. These economic uncertainties paired with a highly anticipated election season, have caused the CEO Confidence Index to go somewhat anemic, according to a recent poll conducted by industry publication Chief Executive. Additionally, concerns are looming regarding tapering profit margin trends and unhealthy yield curves.

This tenuous global political and socioeconomic landscape, while anxiety inducing, is expected to become, at least in the short-term, the new normal. Responsibly maximizing opportunity against an increasingly unpredictable backdrop will be difficult in the coming year. Despite these challenges, investors should take 2020 as an opportunity to fortify their finances through proper diversification and risk mitigation.

There’s no way to definitively know which way the scales will tilt this year. However, physics and economies have something in common – what comes up, must eventually come down. Last year, the National Association of Business Economics reported that over 70% of economists believe a recession will hit before 2022. An additional 14% said it will occur after that.

So, how should investors move forward in 2020?

Speculation may be creating a brace for downturn, but investors can manage economic uncertainty with a long-term approach, regularly reexamining investment goals, time horizon and risk tolerance.

Strategic financial decisions begin with high-touch relationships between investors and wealth managers to consistently grow opportunities and diversify options. Financial professional advisors can help ensure investors remain current in their position and appetite for risk, while also steering clear of emotional decisions fueled by current events and subsequent market activity.

Digital innovation in wealth management continues to grow in popularity and reimagine the way people are managing their finances. However, investors benefit from high-touch engagement with a financial advisor or wealth manager for continued guidance. In the face of economic uncertainty, these relationships are increasingly important. These professionals are equipped with deep industry knowledge, holistic financial solutions and can provide proactive management around an investor’s risk tolerance and long- and short-term goals.

In times of increasing volatility, even seasoned investors may ask themselves what they can do when markets fluctuate. Financial advisors offer support and guidance to help maintain healthy levels of investing, while avoiding anxiety-fueled snap decisions. They are there to help to create a plan and enable an investor’s financial goals. These economic uncertainties can distract investors from a long-term perspective and attaining their future aspirations. It’s important to keep goals in sight and have active dialogue with your wealth manager.

 

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