Dear Investors & Friends,
As 2019 is coming to an end and I am looking ahead to the New Year, I first and foremost would like to thank you for your loyalty and trust in working with Rising Star Financial. This year has been fruitful and I am confident that we will be in an excellent position to continue on this track of growth in 2020.
Needless to say, we will still be facing challenges on multiple fronts, from the political turmoil of impeachment in the United States, through pending global trade negotiations, to military threats in the Middle East and North Korea. However, having laid a lot of groundwork and with foreign markets having extraordinarily performed this year, we will be able to tackle the New Year from a position of strength.
While we generally foresee the U.S. economy and global GDP growth to remain positive, it is advised to be cautious. The Federal Reserve has acted way too quickly by raising interest rates too early and had to reverse its course this year. Furthermore, the Fed went from tapering back to quantitative easing by pouring USD 112 billion in liquidity per month back into the market. This is on the one hand a clear warning sign in the short- to midterm as far as the country's economic stability is concerned. On the flip side, the liquidity infusion has been a major reason and contributor to the record-breaking stock market performance this year.
At the same time though, the available liquidity for lending purposes with commercial banks in the United States has fallen dramatically and the major banks' balance sheets look rather concerning. This development is likely to trigger further quantitative easing measures even though Fed Chairman Jerome Powell keeps on denying that the latest liquidity measures taken are to be considered "quantitative easing". Fact remains that the additional liquidity has been playing a major role in U.S. economic growth (likely much more than the cut of red tape and taxes by the Trump administration) and it needs to be understood that the economy is not yet back on track. We are not within resilient growth territory yet. It is likely that additional measures and support by the government and the Fed will be required to keep the stock market growing and GDP growth within a productive bandwidth next year. The problem is that all of these measures will keep on further reducing the purchasing power of the U.S. dollar domestically and internationally as well as further weaken the overall stability of the U.S. currency while the national debt will keep on growing at a concerning pace.
We are currently working on reviewing our clients' portfolios to ensure our clientele's asset allocation is going to accurately address potential concerns, as well as still take advantage of stock market growth in 2020. Together, I am confident we will take the right steps to keep the ride as smooth as possible in 2020.
Oliver E. Hohermuth, Principal & Chief Investment Officer