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Recession Busting 101 – Change Your Consumer Fear to Consumer Confidence

As my clients’ trusted advisor, I know that they depend on me to sort through the breadth of information in the marketplace and report that which I believe to be the most important to them and their loved ones. Recently I had the opportunity to participate in the cutting-edge, day-long Securities Industry and Financial Markets Association (SIFMA) Annual Meeting in New York City. Given these historic times and volatile markets, I felt very fortunate to be able to attend this prestigious event and hear directly from the country’s premier industry speakers on the very topics most on our hearts and minds today: the state of the market and our economy.

However, before the conference kicked into full swing, I had the chance to pay a personal visit to the Wall Street Bull to let it know just how ready we all are for another Bull Market. I want everyone to know that I am willing to go straight to the “source” for my clients.

The SIFMA conference included top industry executives from every financial and governmental arena.

We started the day attending an early breakfast meeting with Michael Bloomberg, the Mayor of New York City. The remainder of our conference day was presided over by Blythe Masters, Head of Global Commodities for JP Morgan Chase & Company and Chairman of SIFMA. We heard from senior representatives from the SEC, the US Department of the Treasury, and the International Monetary Fund; a panel of Chief Executive Officers of US investment banks; Robert Greifeld, President and CEO of the NASDAQ OMX Group; Ronald A. Stack, Chair of the Municipal Rulemaking Board; and Abby Joseph Kohen, President of Global Markets Institute. Each of these intelligent and accomplished individuals presented their detailed perspective, explained their complex financial models, and highlighted the critical processes important to improving our global financial future. At every break, I had the opportunity to speak personally with many of the other attendees and speakers about their perspective of what these historic times are all about.

Rather than fill this article with the extensive details of each of these presentations and discussions, I would like to report the bottom-line perspective that I came away with. While the problems and solutions we face are complex and global, I am confident that both the private financial institutions and the various government agencies understand what (and how much) is at risk here, what their options are to positively impact it, and how to proceed from here. What I heard from every perspective was that the folks who can make a difference for us know what needs to be done and are busy doing it.

What I want to highlight today, is the other part of the equation that can make a long-term difference: You. Or, more to the point: Consumer Confidence. We all know from listening to the news that Consumer Confidence has recently reached new lows, stimulating a paralyzing consumer fear. When consumers act out their fears, rather than stay true to the basics, those cumulative actions become another major element driving the gears of our economy – and the economy is negatively impacted by these fear-based actions. Certainly the first catalyst to precipitating this fear-based perspective was seeing the uncertainty of our trusted government officials being played out in the news each night. I believe that the second contributor to undermining consumer confidence is the intense scrutiny that the Presidential election process brings to recent events.

What I heard at the SIFMA Conference is that all the pieces are in place to see the credit freeze free up, the short-term commercial paper markets return to normal, and the banks stabilized through recapitalization. I want you to know that it’s all coming together. I know that as consumers, we don’t quite believe it yet because we saw the uncertainty played out on the news. But I want to assure you that as these various programs actually begin to implement, consumers (you) should begin to experience positive, long-term effects and return to a more balanced sense of the economy — and our future. So, I want to encourage you to give these government programs the time they need to work.

Nevertheless, I would be remiss to just stop at this general encouragement. Many of my clients have asked me, “Nick, what changes should I make right now?” My first response is still, “Stay the course.” However, every investor should review the asset allocations in their various investments with an eye to making sure that they are properly positioned to mitigate down-side risk and allow for some participation in up-swings in the market.

However, one action item that may be appropriate for some of you right now is to take the time to review your home mortgage and interest rate. I personally believe that one of the tools the Federal government may use in the days ahead is to reduce the interest rates on long-term, fixed mortgages. If I am correct, I would expect to see 5% fixed mortgage loans to become available sometime in the next 90 days. I don’t expect them to stay that low for long. If you have a variable interest mortgage or a fixed long-term mortgage over 6%, you might want to consider refinancing if the rates drop as expected.

While no one can predict the future, I have supreme confidence that we are not falling off the proverbial cliff, nor do I believe that soup kitchens are in our near future. With this in mind, I encourage you all to make the most of the next few months as we wait through these historic times.