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Financial Articles from Hefren-Tillotson

There Have Been 19 Recessions Over The Past Century. All But One Was Preceded by This …

August 17, 2017

Global central banks have kept emergency policy measures in place for an unusually long time. That is one reason the bull market in stocks has been unusually durable –101 months.

One risk to stocks is if central banks are forced to reverse course and raise interest rates rapidly. Indeed, all but one of the 19 recessions over the past 100 years was preceded by Fed rate hikes, usually in response to higher inflation.

Although inflation is very low today, the economy is approaching an important juncture as unemployment falls to near 4%. There is no precedent in the last 50 years of unemployment falling below present levels without inflation rising (chart).

The critical question today is whether the economy can continue to grow without overheating. We believe it can for the time being. More Americans could re-enter the workforce, allowing employment to grow without dropping the unemployment rate. Likewise, technological breakthroughs (e.g. Amazon, Uber, shale drilling, etc.) may continue to keep a lid on inflation, thus allowing central banks to keep rates low.

Eventually, however, this unconventional economic cycle may end in a conventional way, with rising inflation and Fed rate hikes. Although there are few signs of imminent danger, we believe its a good time for bond investors to hedge against this outcome by owning Treasury Inflation Protected bonds (TIPs) within mutual funds.


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Hefren-Tillotson Inc., is a leading diversified financial services firm providing investment and retirement plan management and comprehensive, financial planning through MASTERPLAN for individuals and businesses. The firms wealth management services are administered by Certified Financial Planner (CFP) professionals, Chartered Financial Analyst (CFA) Charter holders, attorneys, Chartered Life Underwriters, and CPA/PFSs. Hefren-Tillotson offers corporate services including 401(k) retirement planning, executive financial counseling, fiduciary reviews and workplace financial planning seminars. Founded in 1948, the firm is headquartered in Pittsburgh and has offices located in Pittsburgh, Butler, Greensburg, North Hills, and South Hills.

Disclosure:This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.