The Certainty of Uncertainty

By Robert J. Hughes  |  January 4, 2019

The market corrections in November and December of last year signaled an uneasiness on the part of investors who were looking past a still fundamentally happy, bubbling economy and toward a future state that is rife with uncertainty. Markets hate uncertainty, and they showed it by punishing stocks late last year. Much head scratching and pundit ink spilling ensued.

Here we are in early 2019 (Happy New Year to you all), and it bears repeating...the markets hate uncertainty. My line of thinking says that there are many factors afoot and that none of them are under the slightest control of individuals like you and me.

  • The new Congress - a significant Democratic majority operating in the face of a Republican Senate majority and White House. The American electorate gave us this situation and we all await the outcome...will there be meaningful bipartisan forward movement (on anything?)...or will there be retributive head-hunting and virtual gridlock?
  • Will the Fed’s indication of measured interest rate increases throughout 2019 remain on track, or will the low rate of inflation (and keen political pressure) keep rates from inching up?
  • Will the crisis at the border and gun violence create even more poisonous back and forth shouting, or will the national conversation return to civil bounds?
  • Will the U.S. cede its role as the leader of free world and defender of democracy (and world banker and policeman), and turn ever more inward by leaving international markets, organizations and treaties behind, or will we lead by example while exploiting our unmatched innovative skills to the four corners of the world?

The answer to these questions will hopefully become clearer in the coming months and the markets will adjust to reflect the new reality. It is my belief that the economy will continue to perform well in 2019, absent any geopolitical shocks. However, whether or not that is enough to calm the volatility in the markets, only time will tell.

So, how does this make you feel?

Answer A: I still sleep well at night. My job is secure, aliens have not landed. My portfolio is balanced and steady-state, but I do sit down every quarter with my financial adviser and have a candid review.

Answer B: I'm not sleeping well at all. There is a battle going on among my head, heart and stomach. While my job may be secure, I am not feeling secure about where the country is heading. My portfolio is defensive, and more and more weighted in bonds and treasuries.

Which is your answer so far this year?

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About Robert J. Hughes

Robert Hughes, EA, is Principal-in-Charge of the High-Net-Worth Group at Marks Paneth LLP. In this capacity, he handles state, local and federal tax filings, specializing in high-net-worth individuals, estates, trusts and private foundations. Mr. Hughes began his career with the IRS where he progressed from an entry-level position in the error correction department to a senior position as Office Auditor. He also has extensive experience working in the tax departments of several high-profile banks where... READ MORE +


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