Despite the financial markets performing well for the year, the economy has been slowly gathering steam. Thankfully and partly because of paralysis in Washington, the fiscal stimulus is being diminished “just slowly enough” as the economy regains confidence. Economists generally do not yet think we have achieved “breakout velocity” when the economy can grow without any stimulus at all. Because inflation has been non-existent and because signs of deflation remain lurking, the Fed will likely maintain its monetary stimulus and low interest rates for quite an extended period even though private sector loan demand is picking up.
Private sector has largely revived and private sector lending is once again increasing. The money in circulation is finally again increasing albeit slowly. However, we continue to remain cautious. It is far from certain that the economy has achieved breakout velocity or that the private sector is fully healed. There are many hazards, deflation among them, that could upset the as yet fragile recovery before we could possibly achieve any full blown economic expansion.
In context of the above, it is unlikely that we will see the similar stellar returns in the coming year even though we expect to see economic growth continue to strengthen. We anticipate curtailing some of our aggressive positions while expanding positions of more stable growth.
Because these quarterly thumbnail summaries are very abbreviated, please do not hesitate to call me if you wish to discuss your account or our outlook in greater detail.
Very Best Regards,