This past Sunday, like many Americans, my family celebrated the 4th of July. It was a day filled with food and fun with fireworks capping off a great day. The highlight for Katie and myself was watching how excited Francis got for the fireworks. As you have heard me say before, it truly is wonderful to try and watch the world through the eyes of a child.
After watching the fireworks show it got me thinking about all that goes into the planning of the show. Before ordering the fireworks, you need to find the location to shoot them off and get any necessary permits. Once this information is known, you must decide how long you want the show to last along with a general idea of a layout. From there you can order the fireworks and when they are delivered you need to securely store them. Finally, it is the day of the show where you need to lay them out. Once laid out, it is now a waiting game for sunset and the big show.
As you can tell I am not a firework technician and my process is extremely simplified, however, the process has many similarities to financial planning. When planning a major fireworks show, you do not wake up one day and decide to have a show. It takes weeks of planning. Like a fireworks show, be it the sale of a business or something like formally retiring, it takes years of hard work and planning. Once someone knows they can successfully move to the next chapter in their life do they finally “order” the change. Once in retirement, they now must “safely” handle the new freedom and financial responsibilities. Additionally, they can now make plans for new trips or experiences which they may have previously delayed. As we all know, life will throw us curveballs just as there are unplanned events that occur during a fireworks show, some fireworks may misfire or prematurely detonate. These misfires are expected and planned for, just as we work with you to try and help plan through the unexpected events that you may be faced with someday.
Many people say if you have seen one fireworks show, you have seen them all. While there may be some truth to this, next time, ask yourself, in your financial life, are you still planning the “show” or living it.
Moving to some financial information, in the first half of 2021, the U.S. economy powered forward faster than nearly anyone had expected thanks to vaccinations, reopenings, and record stimulus. The overall economic picture remains sound and will most likely support strong profit growth and additional stock market gains. For anyone looking to purchase almost anything, you have most likely felt some of the issues of a reopening economy which include supply chains that are stressed causing a delay in items being built and shipped, some labor shortages have emerged, inflation is heating up and asset prices look expensive compared to historical figures.
The growth rate of the U.S. economy may have peaked in the second quarter of 2021, but there is still plenty of momentum left to extend above-average growth into 2022. Despite the natural challenges of ramping back up, the recovery still seems capable of providing upside surprises, and in the end, we could have our best year of real GDP growth since the early 1980s.
Although higher taxes and more regulation are likely coming, an extraordinary amount of support from the Federal Reserve (Fed) and more than $5 trillion in fiscal stimulus so far (with more coming) should continue to support the stock market and economy for the rest of 2021.
Speaking of the stock market, we expect the robust economic recovery to continue to drive strong earnings growth and support further gains for stocks. Do not forget though, after a more than 90% gain off the March 23, 2020, lows for the S&P 500 Index, some choppy action during the historically challenging year two of a bull market would be perfectly normal.
Turning to bonds, it has been a historically tough year, as yields surged earlier this year. Should the economy continue to improve, the door would be open for stocks to continue to do quite well, but we will always appreciate bonds’ important role in a portfolio as a source of income and as a potential diversifier during equity declines.
While we may need to wait another year for a fireworks show, we know ones own life will have the potential to continue to provide beauty and excitement for you and your family.
Have a great weekend.