Whether you get your news digitally or in a physical format, from big-name news outlets or smaller independent ones, all signs are pointing to a 2024 that’s positioning itself for a decidedly bumpy second act after its first two quarters have been characterized by rising costs everywhere—though, if you’re feeling the pinch of stubbornly high prices, you certainly don’t need anyone to tell you how unusually tough things are right now.
There are, however, plenty of experts who call South Jersey home and are highly experienced in helping their neighbors find their footing throughout cyclical economic downturns. Those financial professionals in both the wealth management and banking sectors note how deeply enmeshed their two worlds are in terms of each other and the overall local economy, putting them in a unique position to help educate their fellow South Jerseyans on how to survive while keeping both their hope and their vision for the future intact.
It starts with understanding how we got here, what the most universal pain points are and what their ongoing effects are.
“Inflation and the rate environment, which are intertwined, are putting pressure on businesses and families,” explains First Harvest President & CEO Mike Dinneen. “In the case of businesses, the cost of goods, supplies and labor are rapidly increasing, which is decreasing the amount of liquidity or working capital for investing or expanding. In addition, the interest rate environment is also making borrowing a less attractive option as well. In an inflationary market, businesses and families are sometimes forced to only spend on necessities, which creates sales demand for other businesses.”
Unfortunately, as local experts point out, there is neither a quick nor an easy fix when the economy is at the mercy of factors both foreign and domestic. Consider how the continued violence abroad carries international consequences, the upcoming American presidential election remains a question mark for many, and the aftermath of a global health crisis is still rearing its ugly head years later, and it’s no surprise that so many feel like we’re wading through turbulent and often uncharted waters.
In fact, as Masso Torrence Managing Partner John Torrence notes, the past two months have actually given rise to identifying a whole new cyclical stage. We’re collectively in neither the “hard landing” of untenably high prices bringing the economy to a screeching halt nor the “soft landing” of growth that slows but still sidesteps a recession.
“You’re starting to hear about ‘a firm landing,’” he says. “All of a sudden, that’s become a new vernacular. A firm landing isn’t necessarily a hard landing, but in certain sectors you do see things dry up: Everybody who has renovated their bathroom already has, therefore Lowe’s earnings are down 17%, or people are deciding ‘I can’t afford nor do I desire to spend the money to eat out three or four times a week,’ so for restaurants, it becomes a firm landing because the customer base suddenly dries up but prices for their goods haven’t gone down as rapidly, and it puts them in a squeeze.”
That squeeze might not be felt directly by every business, but the inherent connectivity of a local economy and its myriad industries makes it a challenge that eventually snakes its way into personal lives and professional livelihoods alike. Given the so-called “trickle-up” effect that means consumers have to be much more cautious in their short-term discretionary spending to protect their long-term financial viability, Torrence additionally notes that “I would not want to own something entirely reliant on consumer behavior right now.”
With soaring prices seeming to be the only certainty everyone can agree on being among their biggest pain points, making do with the dollar’s diminishing power today while safeguarding against future rainier days is the prevailing theme financial professionals are tasked with helping their clients and customers face these days.
And while it’s impossible to predict what’s to come, a combination of experience, analytics and customary caution informs the possible outcomes that financial professionals can comfortably venture. With those in mind, a forecast for 2024’s second half paints a picture of it being a little rougher than its first two quarters, though Stan Molotsky is an ardent advocate of hoping for the best while preparing for the worst.
“I think the second half of the year will be bumpier than the first half,” says Molotsky, president and CEO of The SHM Financial Group. “What we have been doing for the last six months or so is gradually moving into things that are safer and more predictable because we’re confronted with an atmosphere that is more unpredictable.”
It’s hard to know exactly how to protect yourself, your financial position, your assets, your investments and your future when it can feel like every day is plagued with a brand-new uncertainty. But having access to South Jersey’s richly diverse landscape means that you never have to search for long to find great advice aligned with your reality, expectations and stomach for risk.
“It’s like the headlines saying that we’re coming into hurricane season, which may be worse because of the seasonal patterns: I think we’re going to have markets that are going to be more erratic than we have had, and we have to get used to that. And you have to prepare for that,” Molotsky continues. “If you’re going to be a buyer, then you have to do it when things are falling apart and you have the guts to do that—not too many people will. You also have to look at the money you’ve accumulated: when do you need it, what’s it for and just make sure it’s available when you do need it. If you need it in three to six to 12 months, you better park it somewhere where it’s going to be there because the uncertainty that exists, in my opinion, makes it difficult to be 100% committed to the stock market, or anything in that particular matter.”
Professional guidance isn’t out of reach for business owners either fearing or facing a precarious financial position, as those entrenched in the community understand the holistic benefit of being the rising tide that raises all ships to encourage a business landscape that remains as diverse as the people who call it home.
“Our credit union believes in advancing financial inclusion: By providing advice, affordable banking solutions and investments to our entire community, we believe we can advance financial prosperity to those who need it first, and in turn provide meaningful economic development,” Dinneen says. “We know that affordability is a challenge for many of our members in this environment, so we strive to provide a fair pricing structure so that life can be more affordable. … As a low income-designated credit union, in some communities, we are one of only a few financial institutions that still provide a brick-and-mortar location for banking services. We view this as part of our mission, as it’s important for us to provide a safe and convenient environment for the members we serve in such communities.”
It’s admittedly difficult to see the opportunities and oases of optimism present in a persistently unprecedented time, which is why the region’s financial experts do emphasize that working with a trusted partner can help you benefit from a handful of promising trends while avoiding the all-too-tempting trap of making rash financial decisions based on high emotions.
“We have what’s known as an ‘inverted yield curve:’ Shorter-term bonds pay you more than longer-term bonds do right at the moment, because the assumption is rates will come down, which is why you can get a three-month treasury at 5.3% but if you want to buy a 10-year treasury, you’re getting 4.3,” Torrence explains. “Sooner or later, 5.3 is going to become 5, and that is going to be 4.7 and then it’s going to be 4.3 and then 3.9. And then you’re going to be kicking yourself over not buying this 10-year at 4.3 and knowing that you’re getting it for the next 10 years. We’re starting to have conversations like, hey, grades may not go any higher than they already are [so] now might be a good time to start looking at five-year bonds or seven-year bonds and say, ‘Hey, I know I can loan money to the government and at least get a 4.8% yield for the next decade’—that is not something that we’ve seen in the last 20 years.”
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Published (and copyrighted) in South Jersey Biz, Volume 14, Issue 6 (June 2024).
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