Politics Will Largely Determine the Economic Course for 2012

Posted on January 26, 2012 by Robert Fragasso

spacer I recently had the privilege of sharing my outlook for 2012 with the Pittsburgh Business Times. Although the last several years have been very challenging economically, we are slowly recovering. In fact, the latest U.S. Bureau of Labor Statistics’ report shows 200,000 jobs were added to the economy in December 2011, and the unemployment rate, currently at 8.5 percent nationwide, continues to trend downward.

If we add half that many jobs – 100,000 – every month throughout 2012, we’ll shave the unemployment rate even further to 7 percent. So how do we do that? The political stalemate in Washington, D.C., must be broken. The volatility of the market can be directly tied on most days to whether the European Union has got a viable plan to come together and overcome its parochialism. How the world moves politically in 2012 will determine the speed and shape of the economic recovery.

Part and parcel with politics in 2012 are taxes. Although the debate has centered on who should be taxed what amount, how those tax dollars are ultimately used will be a significant factor in determining how the economy fares this year. If we tax people more to maintain nonproductive areas and levels of spending by the federal and local government, the economy will continue to lag.

Although our vote gives us some level of political influence, much of what will happen in 2012 to affect the economic recovery is beyond our control. As investors, it’s important to understand what we can and can’t control. What we can control are the decisions we make. As I’ve said many times, the market’s behavior over the last few years is no different than past cycles. Knowing that, it’s important to make the decision to stay the course you’ve set to reach your financial goals.

We may not be able to control the market, but we’ve learned from it, and we can control how we react to it. Look beyond today to the opportunities you will have after this messy system finds its way through to a solution. And if you need someone to help you make those good decisions to achieve your financial goals, give us a call. We’d be happy to chart a course for 2012 with you.

Article based on in interview with Bob Fragasso in Whirl Magazine, October 2011.
Robert Fragasso, CFP®, is chairman and chief executive officer at Fragasso Financial Advisors, a Pittsburgh-based investment and financial planning firm.  Due to industry regulations, comments are not permitted on this blog.  If you would like to contact the author, please email us at blog@fragassoadvisors.com.  Bob can also be reached for comment at 412-227-3200.

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