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The only certainty is uncertainty

July 18, 2011

Back when the recession was at its peak in 2008, the government responded with a large and much-discussed stimulus package. Whether you agree or disagree with that approach, the subsequent follow-up to that stimulus spending should leave all of us somewhat concerned. It’s worth noting that much of the short-term impact from the stimulus package came about as a result of growth of government itself: new and expanded programs, more government infrastructure and overhead. What’s worrying is that means that the stimulus was implemented in such a way that it was–and still is–difficult to scale back. And now that the economy is once again in a vulnerable place, the consequences of some much-needed fiscal austerity measures would be even more damaging in the short term. Options are limited now, as rolling back stimulus spending would be, in effect, a negative stimulus. The same goes for tax hikes. This whole incident demonstrates some of the dangers of excessive government economic intervention, and reinforces the lesson that we can’t spend our way out of debt. All of this has contributed to a political climate and a financial outlook that are full of uncertainty. Businesses and investors are nervous, and figures from all sides of the political spectrum–from Steve Wynn to George Soros–have expressed concern, with some publicly criticizing the President’s handling of these issues. And now with Europe in dire straits and U.S. firms on the hook for insuring those bonds, our economic vulnerability has been ratcheted up even further. There are growing rumblings about the potential for another significant recessionary cycle in the next 12 to 18 months. And while it might not happen, the fact that this is even being discussed is a real concern.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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