Founded in 1992, Jackson Wealth Management is an independent, fee-only investment advisor. Founder George P. Jackson has been the CEO/CIO of the firm since its inception with the goal of delivering value to his clients and his associates. 

Securities Offered through Triad Advisors, LLC. Member FINRA/SIPC
Advisory services offered through Jackson Wealth Management, LLC. 
Jackson Wealth Management, LLC is an affiliate of Jackson Retirement Planning, Inc.
Jackson Wealth Management, LLC is not affiliated with Triad Advisors, LLC.

755 Primera Boulevard, Suite 1001

Lake Mary, Florida 32746

The Federal Reserve Board has Never Engineered a Soft Landing Beyond Full Employment

December 24, 2018

 

Our office dart board – having some fun – taking out our frustrations

 

 

 

12/24/2018 11:55 AM

 

Dear Friends,

 

 

It’s all about the Fed

·     The Federal Reserve Board has Never Engineered a Soft Landing

      Beyond Full employment. Few other developed nations’ central banks

      have either.

·     Recession risks look low at this time

·     We are currently in one of the strongest labor markets since post war

      1945, supported by

             ·     Number of job openings per unemployed worker,

             ·     Quit rate

             ·     Household reports of the ease of finding a job, and

             ·     Employer reports of the difficulty of finding workers

·     Inflation readings are soft, with core PCE inflation (the Fed’s favorite

      measure of inflation) is sub the Fed’s 2% target

 

However, Chairman Jerome Powell, who increased interest rates 4 times in

2018, has said he will raise rates twice in 2019.

 

Bring back Janet Yellen, she is a cautious smart woman, and a good Fed Chairman. We prefer her Dovish approach compared to her hawkish successor Chairman Jerome Powell.

 

We are concerned that the current Fed action could possibly cause a

recession, even though currently the economy seems fine.

 

No doubt the interest hikes so far will probably lower GDP from the current

approx. 3.5% to perhaps below 2% in 2019.

 

Meanwhile stocks are in a mini-crash. We believe this is due to algorithmic

type trading, such as:

·     Commodity Trading Advisors (CTAs)

·     Volatility targeting – equity reduction as volatility increases and vice

      versa

·     Risk parity strategies – managing a portfolio for a constant volatility by

      adjusting the stock/bond mix

·     Leveraged ETFs

·     Liquidity-constrained ETFs

·     High frequency trading (HFTs)

·     Extreme option positioning

 

 

Below is the YTD daily chart of the S&P 500 index – note the relentless daily

declines in the US large cap index. 

In the lower window we can see the VIX volatility index (orange line) rise to its

current level of 34.53

 

 

 

 

We have taken action to reduce equity exposure in our model portfolios.

 

What should you do?

·     Nothing, we are managing your portfolios for you, or

·     Call your advisor with any concerns that you may have: 1-800-578-

      3181

 

 

 

 

 

 

 

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