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normally do my economic commentary in November or December, but this was no normal year. We had one of the worst Decembers in the market in 60 or 70 years, and many of you have been seeing it on my social media pages. I don’t predict the stock market, but I can tell you a few things about the economy. So for my 2019 economic commentary, I want to share what’s the same as last year, what has changed, and what your clients need to know. Let me start with that mathematical facts that haven’t changed in years.

Ever since I’ve been doing these commentaries, I’ve been mentioning something few economists were willing to say: interest rates will remain low for a very long time. You’ve heard me talk about the three D’s that are driving our current economic environment, so I don’t want to spend too much time on them. Just remember that debt, deleveraging, and demographics prove that a lot needs to change in this country before interest rates go up, and that’s not my opinion—it’s based on mathematical facts. Review my previous commentaries to catch up because this year, I want to tell you what has changed.

In 2012, when I first started doing these commentaries, the U.S. debt was $13.53 trillion; our debt in 2018 totaled $21.46 trillion according to usgovernmentspending.com! Not only is this number trending in the wrong direction, but it has grown so large, that the interest on our deficit alone is digging our economy into a deeper hole each year. The interest on our debt has actually created a theoretical cap on interest rates. Interest rates literally CANNOT move much higher without sending our economy spinning into a recession or depression (which, in turn, causes interest rates to plunge).

Think about it like this: if one of your clients with a $330K salary wanted to buy a $2.2M home they probably could. But if they also had $20M in debt at a 3% or 5% interest rate, it would be impossible to even get approved for the loan, and it would almost certainly drive them towards bankruptcy! This is the situation our country is in (with a few more zeros). The real problem has to do with the FISCAL GAP! So now that you understand the math behind the situation our economy is in, what’re you going to do about it?

Your clients in their 20s, 30s, or 40s will be able to weather the storms in the stock market, but your clients in their 50s, 60s, and 70s getting ready to retire better wake up because the order of returns risk is going to become extremely important over the next decade! They are going to need some guarantees to handle all the volatility. So let me ask you this: what industry brought this country out of the great depression? Who helped retirees rebound after 2008? The life insurance industry was made for times like this! When it gets BAD out there, retirees need to have a safe place for their money. In times of UNCERTAINTY, people crave CERTAINTY! Guarantees really do matter. The next few years could determine a lot for our economy (there’s a presidential election in 2020 after all), so save a seat in one of my weekly webinars for more free knowledge that will help you and your clients stay prepared.

Follow me on social media for more commentary throughout the year,

-Tom Hegna