New World Order

Early this year, the term “American Exceptionalism” was widely referred to by the media and was credited for the continued outperformance of the US stock market as compared to the rest of the world. It is amazing how much can change in a few months. It has taken the Trump administration only a handful of tweets to undue ninety years of post-World War II alliances. For decades, the US has been the global stabilizer. Today, many feel it is the global destabilizer. Even if Trump were to reverse all the tariffs, it is very unlikely that the rest of the world would forget this period. For an example of the swift change in sentiment, one can look to the depreciation of the US dollar. In January, the US dollar/Canadian dollar exchange rate was approximately 1.48 – it is currently approximately 1.39. Over the same period, the US dollar decreased by approximately 10% versus many other currencies (including the Euro and Japanese Yen). We all hope the tariff issue will be resolved shortly. However, we expect it to be a persistent challenge for months to come.

Economy & Interest Rates

Most economies around the world have begun to slow and while the risk of recession is much higher than it was a few months ago, we will likely not have clarity on the severity of the slowdown for three to six months. We anticipate that the tariffs will lead to higher prices (inflation) and an increase in unemployment. If unemployment does increase, we expect that central banks will begin to lower interest rates. Currently, markets are anticipating several interest rate reductions (each reduction is typically one quarter of one percent) over the next twelve months. Lower interest rates should help stimulate the economy. A silver lining is that lower interest rates will help people who are looking to refinance their mortgages over the next year or two. Another silver lining is that the expectation of slower growth has led to a reduction in the price of oil – making it cheaper to fill up a tank at the gas station.

What action should you take?

During times of heightened volatility, it is very important to stay focused on your long-term investment plan. If you do not need to sell stocks to fund your lifestyle, we believe that riding out this period of volatility will serve you well over the long term. If you would like to discuss your family’s investment plan, our team would be happy to connect at any time.

Pearlstein Wealth Update

As many of our clients know, Alicia Kirshner is expecting her second baby boy in June! We are thrilled for Alicia and her growing family! Additionally, this summer, we will be welcoming our summer intern, Danielle Godin. Danielle will be here to support the team’s administrative needs as well as spearhead several special projects.

Wishing everyone a happy and healthy Spring!

Pearlstein Wealth