Known or Unknown?

Lately, it seems that we're bombarded with new articles or stories with every news cycle regarding our modern politics & its effect on the economy or stock market. Some days you just want to escape the craziness and the anxiety in every reporter's voice or headline. It can be downright exhausting, especially when you think about how it affects you & your money. All of this had me thinking about...Donald Rumsfeld. Why, you ask?

In 2002, former Secretary of Defense Donald Rumsfeld was answering a question in a press briefing (see the clip below). He was actually describing a concept that was invented in 1955 by Joseph Luften & Harry Ingram which was called a Johari Window.

There are 4 quadrants to consider.

The Arena/Open Area = Known by Us; Known by Others
The Blind Spot = Unknown by Us; Known by Others
The Facade/Hidden Area = Known by Us; Unknown by Others
The Unknown Area = Unknown by Us; Unknown by Others

So, let's consider three main issues that have been occupying the focus of US investors recently: the sustainability of continued economic growth, midterm elections, and the Russia investigation.

(For purposes of this blog, "Known" or "Unknown" is only being used to adhere to the original Johari Window language, and is not a guarantee.)

	KNOWN BY US	UNKNOWN BY US
KNOWN/BELIEVED BY OTHERS	Federal Reserve wants to raise interest rates & normalize balance sheets. Interest rate increases will be moderately implemented in terms of amount and timing, given data dependency.	According to fivethirtyeight.com, it is likely that Congress will be split after the 2018 midterm elections. Future fiscal policy could depend on this outcome.
UNKNOWN BY OTHERS	Investment strategies can be modified to adapt to economic/market conditions. A "one size fits all" approach may not be suitable for you. Understand what options are available to you based on your motivations, not your stimulation.	The Russia investigation is a wild card. This will move from Unknown to Known as more information comes out and as the investigation progresses. While economic growth has trudged along for the better part of a decade after facing two major financial crises in the previous 10 years (tech bubble in early 2000's; financial/housing crisis in 2008-2009), some are concerned about a slowdown as inflation has increased over the last 12 months.

In my opinion, if we deal with what we know or believe based on research, we can work with you to build a plan that is flexible. In summary, we believe that interest rates will increase moderately, and that there will likely be a split Congress which could affect fiscal policy in the next couple of years. I also believe that much of the Russia investigation, while historically significant regardless of outcome, will be mostly noise in an economic sense. It is much more of a concern to gauge the viability of sustained, organic, economic growth given the subdued real wage growth over the last 12 months compared to the increase in the Consumer Price Index, as well as the consumer's ability & willingness to continue spending.

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