Googins Advisors Newsletter
Message from Louise Googins
October 3, 2022
Growth vs Austerity – what do you believe in? As mentioned in the last newsletter, economists Art Laffer and Stephen Moore say “growth, not austerity, is the best answer to inflation.” These terms can be simple: ‘growth’ meaning ‘deregulation of rules’ on industry which allows owners more options; It does not mean there are no rules, just smarter rules. Less is more!
Austerity means increasing taxes and rules on business and citizens. Which are you most comfortable with? Which do you think you thrive under? Years ago, when I was a beginning teacher, I learned about positive reinforcement. What a wonderful surprise to learn about the value of praise over criticism.
It takes times of serious stress before the idea of allowing more freedom and growth is discussed, and yet it seems to work well each time it is tried. However, there will always be people trying to convince you a system is not working.
The new Prime minister of England, Liz Truss, has recommended that “a dose of tax cuts, new spending and deregulation will do for the British economy what a similar recipe did in the early 1980’s for the U.S: lead to an economic revival.” p. A16, The Wall Street Journal, 9-23-22
What does good planning tell us to do? I see it every day in our clients. They conserve during the good and the bad times, they use debt only for a solid loan on a house or a car, and they expect growth to continue.
The Markets are having a tantrum; don’t let the day-to-day gyrations affect you. Look long term; review the historical picture which indicates what has happened after each bear market. I count 10 recessions between 1950 and 8-31-22. Capital Group, National Bureau of Economic Research, Refinitiv Datastream, Capital Group Guide to Recessions . Following each recession, expansions have been powerful. The average expansion has lasted 69 months and the average recession 10 months. Growth Domestic Product, GDP, has grown 24.6% on average during each expansion and receded 2.5% during each recession. 12 million jobs have been added during expansions on average while 3.9 million jobs have been lost during recessions.
Are we now in a recession or not? To name it seems unimportant but name it we must, according to the media. In general, a recession occurs when our economy gets “out of balance.” Economic slow downs and corrections may not affect you as much as it affects someone else but if you lose your job, you may be seriously affected. Recessions are a natural and necessary means of clearing out excesses before the next economic expansion. They are relatively small blips in economic history and it is best to remember that some of the strongest stock rallies have occurred during the late stages of a recession per the information found at “Insights” and CapitalGroup.com.
Rob Lovelace of Capital Group noted, “You can’t have such a sustained period of growth without an occasional downturn to balance things out. It’s normal, it’s expected and it’s healthy.”
A long term plan calls for courage during times of “recession” with an attitude of appreciation during times of growth. We encourage you to add to your investments and see the power of buying at lower prices while remaining positioned for when the market eventually rebounds. Just call us to start a regular monthly investment program. You’ll be glad you did!
Louise Googins, President, Investment Advisor
Michael Googins, Administrator
Kim Rankin, Accountant
Richard Martin, Investment Advisor
Lynne Goldsmith, Investment Advisor
Dayton Hoffmann, UW-Madison Intern
Andrew Spengler, UW-Madison Intern