Your Investments in a Changing Economy

To say that the economy is constantly changing is an understatement. Household savings may be down one month while corporate profits are up and inflation is stable. The next month it may be a completely different story. While all this economic data sounds significant, what do shifts in our economic climate really mean to you and your investments?

Effects on stocks. Economic changes can affect the performance of companies—either in the dividends they pay or the share price. In an expanding economy, for example, stronger demand could mean higher sales and profits. Low interest rates often spark expansion and increased profits. On the other hand, if the Fed tightens rates, stock prices may slide as the higher cost of borrowing slows expansion and cuts into profits.

Effects on bonds. Interest rates also play an important role in bond prices. As interest rates fall, prices of existing bonds generally do the opposite. That’s because investors are often willing to pay more for a bond with a higher rate than that of a newly issued bond.

Change is constant. To keep its balance amidst competing influences, the U.S. economy has historically repeated a fairly regular series of changes called the economic cycle. While in the past a sequence has averaged two or three years, the recent unprecedented economy has charted new ground and may continue to do so for some time.

If all this seems confusing, don’t worry. Get help. Seek guidance from a financial advisor who can shed some light on the changing economy, and most importantly, how it may affect your financial future.

Scott Berman is a Financial Advisor and Managing Director at Berman & Associates, a financial advisory practice of Ameriprise Financial Services, Inc.  Advisor is licensed/registered to do business with U.S. residents only in the states of CA, CT, DC, DE, FL, KY, MD,ME,MO, NC, NJ, NY, OH, PA, SC, TN, VA, WA, WV.

Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC. Some products and services may not be available in all jurisdictions or to all clients. This information is not intended to provide investment advice and does not account for individual investor circumstances. Investment products are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution and involve investment risks including possible loss of principal and fluctuation in value. There are risks associated with fixed income investments, including credit risk, interest rate risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities.

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