The midterm elections were a surprise to many. There was no Red Wave.
The House of Representatives has a small majority for the Republicans. The Senate remains with a small majority for the Democrats. The Biden administration has two years to make a positive difference in a very uncertain economy.
Inflation is top on the list of concerns for the country. Oil remains the biggest part of the inflation picture. Oil doesn’t just represent the price at the pump, but it encompasses the delivery of goods and services, the rubber and tire industry, the asphalt industry, the medical industry and the plastic industry. The U.S. must do everything possible to bring the price of oil down.
Excessive spending is another big part of the inflation we are now experiencing. For decades the U.S. government has consistently overspent.
The current U.S. debt is over $31 trillion! The official budget deficit is well over $1 trillion! (The government spends over a trillion dollars more than what it brings in!)
Unfunded liabilities (promised to pay someday), largely Social Security and Medicare, represent over $172 trillion! These numbers are not opinions! They are simple math! ‘
We cannot continue down this path. Both sides of the political aisle need to come together with a comprehensive budget. And the time to do this is now!
The war in the Ukraine continues to drag on. The cost of human lives and treasure is dramatic. A plan to end this conflict is critical. This war has had a significant inflationary effect with the costs involved, especially the increase in spending with no end in sight and the upward pressure on the price of oil.
The southern border continues to have a dramatic effect on our economy. I talked with my good friend, Oscar Leeser, the second-term Democratic Mayor of El Paso, Texas, about the border crisis that he is currently dealing with. Mayor Leeser told me he is frustrated with the lack of a plan by the federal government with the thousands of border crossings the past few years.
While there are many quality people coming across the border with legitimate asylum concerns, there are also criminals, drug dealers and human traffickers as well. Over 701,000 fentanyl deaths took place in 2021, and most of the fentanyl comes across the southern border. This situation takes an economic and a significant emotional toll on all that are affected. A comprehensive plan must be put in place.
As we approach the end of 2022, China continues to pose supply chain problems. Its GDP — Gross Domestic Product, the monetary value of final goods and services produced in a country in a given period — will soon surpass that of the United States. Our dependence on China’s manufacturing for key components in our technology and other industries is problematic.
Manufacturing independence is extremely important to the health of our economy and an increase in goods produced by U.S. companies by U.S. workers can move us in that direction. Let’s look for a lot more of “Made in the U.S.A.!”
Uncertain times lie ahead, as market volatility raises concern and interest rates continue to climb. As an investor, it is more important now than ever to develop and construct a diversified financial plan of “safe money” assets and non-correlated investments that are not traded in the public markets, thereby, reducing or eliminating price volatility. Also, an asset class of the highest quality stocks, bonds and alternative investments should be included.
This combination of different types of investments should fit your goals, objectives and risk tolerance levels. Most importantly, you will have developed a plan that fares well through good times and bad.
Stay the course!
Tim Tremblay is president of Tremblay Financial Services in Santa Barbara (www.tremblayfinancial.com).