What Will Drive the Economy Now With David Spika

Show Notes

Matthew 6:34 is a good reminder not to worry needlessly about the future. But the Bible DOES tell us to prepare for it. We’ll talk with David Spika about that today on MoneyWise. 

Matthew 6:34: “Therefore do not be anxious about tomorrow, for tomorrow will be anxious for itself. Sufficient for the day is its own trouble.

David Spika the Chief Investment Officer at Guidestone, a financial services firm helping those in ministry as well as the broader Christian population, and an underwriter of this program.

The recent debt ceiling impasse brought uncertainty to the markets, even though a default on U.S. debts was highly unlikely. So now that the dust has settled on that agreement, what’s currently driving the economy? 

WHAT NOW? 

Spika says it’s the same thing that’s been driving the economy for the last year and a half: interest rates and inflation. We still have core inflation as high as it’s been in more than two decades. 

The Fed is committed to bringing inflation down to 2%. So they've got the Fed funds rate over 5%, and the rate hikes could continue for as long as two years in an effort to get spiraling costs under control. 

Ultimately, he says, we cannot reduce inflation to a realistic and sustainable level unless we have a recession. And to do that you have to reduce consumer spending by reducing employment. So those are going to be the key factors in the near future.

MARKET DIP APPROACHING? 

Spika adds that stocks are still very expensive today at 20 times future earnings, and they do not reflect higher interest rates or higher inflation. Nor do they reflect the potential for a recession and much lower earnings growth. So odds are strong that we’ll see the market come down soon. Ultimately, though, that's good for long-term investors, particularly those who have cash on the sidelines and are looking for a better entry point.

FIXED INCOME SECURITIES

Fixed-income securities have taken a hit over the last year or so quite a bit. What should we expect in the near future? 

Spika says he believes a brief pause in rake hikes, likely followed by rike hikes that are smaller than previous increases, could create much lower interest rate volatility. That would be positive for bonds, as near its peak, interest rates should be relatively stable and ultimately will go lower. So there’s a good chance bonds will produce the best total return we've seen since 2007.

GUIDESTONE OPTIONS

Guidestone offers multiple options for people who really are concerned about their savings and looking for peace of mind.

The first is their Defensive Market Strategies Fund. This is a low-volatility strategy that tends to incur only half of the volatility on the downside of the s&p 500. So that's a great place to have equity exposure on the bond side, or low and medium-duration bond funds, both with yields nearing 5%.

They also offer an Impact Bond Fund. This is a relatively new fund, which provides for impact investing in areas such as the sanctity of life and the spreading of the Gospel. It’s a true core bond portfolio that does have a good place in most investors' portfolios.

You can learn more about Guidestone at Guidestonefunds.com. 

On today’s program, Rob also answers listener questions: 

 

-How do you decide whether to self-manage your money and investments or hire a professional?

-What’s the best way to shop around for term life insurance? 

-How do you determine what to do with retirement funds after moving them out of a company-directed 401k? 

-What’s the best way to research life insurance policies that would pay off your mortgage when you go home to be with the Lord? 

RESOURCES MENTIONED:

 

-  Find a Certified Kingdom Advisor

-  Betterment
-  Schwab Intelligent Portfolios
-  Fidelity

-  Sound Mind Investing

Remember, you can call in to ask your questions most days at (800) 525-7000. Also, visit our website at FaithFi.com where you can join the FaithFi Community, and give as we expand our outreach.