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Things to Watch Out For As the Economy Improves

By WealthTrust Arizona

Despite the naysayers, the economy is improving, as debt is down, confidence is up and the employment picture gets (albeit, slightly) better.

No matter how much better things are now, not even the most optimistic politician, economist or analyst can credibly say our nation is out of the woods yet. While predicting the future is always a rocky proposition, there are a few factors we should keep an eye on when it comes to how the next few months will play out.

Rising Prices at the Pump

It may seem counterintuitive, but the per-gallon price of gas continues to rise, with some parts of the country seeing average prices at more than four dollars a gallon. Why is that counterintuitive? Because (again, despite what some are loudly saying) the output of U.S. refineries has hit all-time highs, and the rate of American gasoline consumption is the lowest it has been in more than 10 years. For the first time in more than 60 years, our country is actually exporting more gas than we import.

Given all that, why are we bracing for even higher gas prices as we get ready to enter the summer driving season? There is oil speculation – which is driven at least in part by forces outside our control in the Middle East. While the United States has been pushing for Iran’s largest oil customers to embargo Iranian oil in protest over their nuclear program, the Iranians have made threats that they would close the Strait of Hormuz, the gateway through which a hefty 20% of the world’s oil passes. Even if they don’t follow through with the threats, that kind of global brinksmanship is enough to push the price of oil even higher.

The European Problem

These days, all eyes are on Europe, as the rest of the world waits to see how Greece and other nations on the continent deal with their impending debt crisis. The United States is a major exporter of goods to Europe – more than 250 billion dollars each year – and a deep European recession could dramatically affect that number. This would affect exports and manufacturing, a key part of the U.S. recovery. If we find that our nation’s banks are more exposed to European assets than we had been led to believe, they might cut back on growth, which would negate some of the progress we have seen.

The Political World

Last year, the U.S. lost its top-tier AAA credit rating after more than 70 years. At the time, Standard & Poor’s said, “The effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenge.” This was shortly after Congress came uncomfortably close to allowing the U.S. to default on our nation’s debt obligation. While we dodged a bullet in this case, the next time such an ideological showdown looms, we may not be so lucky. It is this kind of intangible which makes it so hard to make accurate economic predictions.

The Unforeseeable

Of course, we can never predict the future. To borrow a turn of phrase from former Defense Secretary Donald Rumsfeld, there are things know that we don’t know. No matter how carefully and intelligently we plan for the future, there will always be an economic crisis of some sort and an accompanying market reaction, most likely a panic. Before it hit them last year, no one could have predicted the economic toll the tsunami would take on Japan.

No one can predict the next big oil spill, political insurrection or other large, life-altering event which will strike somewhere in the world. One thing we can state with certainty: that event will have either direct or indirect economic consequences on the rest of us.

 

DISCLOSURE: WealthTrust Arizona is a fee based investment advisory firm that specializes in integrating portfolio management with estate planning for high net worth individuals and families. Services include portfolio management, estate planning, asset and lifestyle preservation, taxation concerns, access to trust and estate documentation preparation, business succession planning and more. The professionals at WealthTrust -Arizona are frequently sought out by the national media such as The Wall Street Journal, Forbes, New York Times, CNBC, BloombergRadio, and others to share their thoughts on matters that impact our clients.

Given the recent events impacting investors and their financial security, we would welcome the opportunity to provide a second opinion for anyone who would like to have a check-up on their investments, financial plan or estate plan. If you know of anyone who may have a concern with their current advisor or current investment portfolio, we encourage you to share our contact information with those that could benefit from a complimentary review.

Advisory services offered through WealthTrust Arizona, a registered investment advisor. WealthTrust Arizona does not engage in the trust business in the state of Arizona or in any other jurisdiction. Not FDIC insured. Not bank guaranteed. May lose value, including loss of principal. Not insured by any state or federal agency.

 

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