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No Place to Hide

Terry Savage, Tribune Content Agency on

The world is awash in geopolitical confusion. In Britain, a new Labor government was just elected by a landslide, after 14 years of Conservative rule, which included Brexit. But the new Labour prime minister is said to have an authoritarian bent. In Canada, the existing eight-year reign of Liberal Prime Minister Justin Trudeau faces losing to a Conservative in an election which must be held by October 2025 but will likely come even sooner.

And I don’t have to detail the extremity of the choices facing Americans as they prepare to vote in the presidential election this November. Those issues have given rise to public expressions of doubt over the future of American democracy.

In the background, but not so far out of sight, there are seething issues of war in the Middle East and on the fringes of Western democracies in Europe, plus concerns about China’s future plans for Taiwan, and the ongoing danger of North Korea’s Kim Jong Un. There’s plenty to keep you up at night!

If you’re worried about the future, you’re not alone. These issues will affect your investments and your ability to retire. And they will certainly impact the kind of country we leave to our children.

When it comes to financial planning, you’d do wise to acknowledge these uncertainties — and keep them in perspective. Our domestic political issues are significant, but part of a larger global picture. And at this point, the United States remains the safest haven in the world.

That global financial reality is proven by the flow of money into U.S. government IOUs — Treasury bills, notes and bonds — despite our mounting national debt. The “smart money” around the world is still willing to buy our debt at relatively low interest rates. As of this writing, six-month T-bills yield around 5.3%, and the global money markets are willing to lend to us at a rate of about 4.25%.

They chose the U.S. currency over the Euro, Japanese Yen and other alternatives. And much of that money has gone into the U.S. stock market, now trading at record highs. Yes, you may be worried about the future of the country or the world order. But the stock market is — so far — taking it all in stride and striding higher.

It’s worth noting that gold took a significant jump, to new all-time highs, on news of Britain’s labor victory. The thought is that a government overly concerned with social spending might create another round of inflation.

Perhaps gold is returning to its traditional role as a store of value in uncertain times, as opposed to merely being a non-interest-earning, trading commodity. Notably, on the same day gold prices jumped, the price of Bitcoin fell nearly 5% at one point. While digital technology and even digital currencies are the likely wave of the transactional future, they have yet to prove a reliable hedge against fluctuating currency values.

 

When it comes to oil and energy, the global markets remain torn in two directions. The United States produced more crude oil than any nation at any time, for the past six years in a row — despite efforts to reduce climate change. Global supplies have increased, offsetting Middle East war fears that used to send oil prices soaring. As of this writing, oil is trading at around $85 per barrel, far from its highs of $140 in March 2008.

And also worth noting — all of the dire predictions of economic disaster that you received in warning emails, late-night cable commercials, on Facebook, on Reddit and wherever else you consume your information — all have failed to come true to date.

You can start by understanding the risks in your own financial plans and investments. Since you can never know the future for sure, it’s wise to be balanced in your assets, minimize costly debts and have liquidity for emergencies or to take advantage of future opportunities.

It’s humbling to know that you really can’t change much — except to think, vote and express your opinion in case anyone wants to listen. But it’s worth paying attention, instead of ignoring these uncertainties. If we all took a step back, gained perspective and took a deep breath while coming to some sensible agreement with each other and the markets, the world would be a far less scary place.

And that’s The Savage Truth.

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(Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” Terry responds to questions on her blog at TerrySavage.com.)

©2024 Terry Savage. Distributed by Tribune Content Agency, LLC.



 

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