This Time is Different
The financial landscape is littered with past "experts" who died by the claim "this time is different". We are not that bold. However, we do believe the next 20 years will not look like the past 30 years. Three reasons support our conclusion:
- Long-term interest rates have steadily declined since the early 1980’s serving to stimulate economic growth and drive increased leverage. This interest rate effect has also had a pronounced impact on fixed income investment returns. At RMH Investment Management, we believe this cannot continue much longer and a flat or increasing level of interest rates will shape a different economic environment.
- United States tax rates have declined since the early 1980’s spurring consumption and, thus, economic growth. Government deficits cannot be sustained indefinitely in our opinion as borrowers eventually demand higher returns to compensate them for irresponsible fiscal management. At RMH Investment Management, we expect the policy of high spending with lower taxes to revert to a policy of balanced budgets and fiscal prudence. We hope this evolution is executed on our country’s terms rather than the bond market’s terms.
- The Baby Boom generation is aging into a new lifestyle category that requires less income and lower spending. Meanwhile, the decline in birth rates experienced after this generation will result in a lower population living within the lifestyle category associated with peak economic output. At RMH Investment Management, we see the demographic trends as more of a headwind going forward.
The investment management industry evolved greatly during the past 30 years refining concepts such as total return, efficient frontier, quantifying risk, and increasing diversification. However, we believe strategies resting on the experience of this narrow time frame will fail. This time is not different, but it will more closely resemble periods with flat to rising interest rates, higher taxes, and less favorable demographic trends.
Please come see us at our location and learn more about why RMH is different and how our strategies will better help you accomplish your goals and objectives in this "different" investing environment.