I had a conversation with someone about income inequality last week.
The issue gets a lot of press these days and the general tone always seems to be that “poor” people are struggling and its “rich” people’s fault. It’s typically viewed as a way to pick on wealthy people.
There are a few things I’d like to say about this because I believe this is a major issue in developed economies around the world.
I believe there is a fundamental problem when anyone takes the stance that solutions start with someone else. No matter your circumstances, there is something you can do to improve your situation. It may be as simple as a better attitude, but there is always a first step of responsibility.
I grew up and played sports in a diverse community, I’ve spent years working with the homeless population in my city, and years working with the people of South Sudan. I have not and do not live in a total bubble. I feel confident in saying that no matter your circumstances, there’s always something you can do to improve the situation for you and those around you.
I also believe that there is no such thing as a “self-made man.” This means that anyone who has found success is deeply indebted to a lot of other people. It also means that everyone needs help.
Since this is true, I believe that everyone has the obligation to give back in the service of others. Personally, I believe that everyone has a responsibility to not just give back, but to give back in a sacrificial way. I’ll wait to beat that drum on a different day.
Income inequality is an issue. There are lots of people, good, hard-working people, who have little to no quality option for work. I believe that everyone has a responsibility in working to improve the situation.
Why should you care as an investor? Central Banks all over the world are determining their fiscal policies based on perceived economic health. Central Banking policies have been the major drivers of equity and other asset markets for a long time. In summary, things like income inequality impacts Central Bank thinking and therefore your portfolio.
In case you’re wondering, I think socialism is foolish and don’t like most government social programs so don’t go getting the wrong ideas from my article. My desire is for a country and world where we’re all far less selfish.
What the Market’s Going to do Next
Seems everywhere I look people are continuously waiting for a major market drop.
Typical things that are cited are the fact that the markets are overvalued on an historical scale (true), the current bull market is getting old (true), Central Banks appear to be low or out of firepower (true), and there are numerous global events in play that could lead to greater economic downturn (true).
All of these things are true, but that doesn’t mean the markets will fall.
My expectation is that we will see a sizable move up in the markets (maybe even ~20%?) before a major bear market sets in. I do expect a notable bear market, but also tend to believe things will get even crazier before that happens. Of course, I don’t know the future and fully reserve the right to be wrong.
What should investors do?
Just about every investor I respect is sitting on sizable cash levels somewhere in the 30-50% range. This allows them to protect a good portion of their portfolio, but still enjoy any potential upward move in the markets.
No one knows what will happen next, but wisdom seems to indicate caution is warranted.
Remember, market shifts like this can take months (and longer) to ultimately play out. Stay smart, focus on fundamentals, and be patient.
What are you doing with your portfolios?
I’m eager to hear your thoughts on where things may be headed.
Let me know if you have any questions or if I can help in any way.
Content You’ll Also Enjoy:
060 Mike Nadel – How I Build My Portfolio as a Dividend Growth Investor
059 David Stein Father’s Day Interview – Deciding Between Family and $35 Billion
Worth Reading This Week:
I’m behind on my reading! Stay tuned for more links next week.
Income Inequality and the Upward Crashing Market
Disclosure: This article is for information purposes only. Comments made by my guests do not necessarily represent the views of Brian or Investor in the Family. There are risks involved with investing including loss of principal. Brian and Investor in the Family makes no explicit or implicit guarantee with respect to performance or the outcome of any investment or projections made. There is no guarantee that the goals of the strategies discussed by Brian and Investor in the Family will be met.