As I write this column from Savannah Georgia, there’s a lot of uncertainty in our world – locally, nationally, and internationally.  Hurricane Debbie is making landfall along Florida’s Big Bend area.  The track keeps changing, but the forecast for rain inland through South Georgia and along the Georgia and South Carolina coasts points to potential rainfall and severe flooding.

The U.S. stock markets have yet to open for the week, but international markets are having their worst day in years.  It’s too early to use the word “crash”, but the magnitude of the market correction is significant.  The flood on Wall Street which began last week is one of selling. 

Meanwhile, the U.S. Presidential race is more vexing than ever.  In the last month we’ve seen one candidate get shot, one withdraw from the race and mostly disappear (while still holding the office) and a new candidate get appointed by party bosses.  A Vice President selection is imminent.  Democrats are publicly grappling with whether or not a popular governor of a swing state – Pennsylvania – will turn off base voters because of his “support for Israel”.  Those are air quotes added, as by now we all know that phrase is a euphemism for anti-Semitism.  

Looking around the globe, we have a clearly stolen election in Venezuela, whose chief exports to the United States are oil and refugees.  We’ve issued strong statements, but not much more. 

Our foreign policy is instead anchored at supplying weapons to Ukraine but then telling them not to use them in a way that upsets the country they’re using them against.  We’re doing much of the same with Israel, with even more random restrictions.  We don’t want them to target the civilians which Hamas and Hezbollah hide behind, but we also seem upset when Israel quite successfully targets and eliminates top officials of these Iranian proxy terrorist organizations. 

These all seem like real yet disjointed problems.  Let me quickly try to tie them all together before I get on the road for an evacuation week in Atlanta.  By then, we’ll know how the storm has impacted Georgians and those across the Southeast, and how the markets in total have reacted to a sharp downturn to start the week. 

It’s the markets’ reaction that may be the best predictor and barometer for the sum total of the above events.  They can absorb blips here and there easily.  Too much uncertainty at once, however, and there are real problems that turn perception into reality.  Economics too often earns its moniker as “the dismal science”.

Roughly 70% of the U.S. economy as measured by Gross Domestic Product is represented by consumers and their spending.  This part of the economy has held up quite well despite the Federal Reserve’s attempt to quell inflation via restrictive (high) interest rates.  

This is almost entirely due to the generous and consistent spending by upper income and wealthy consumers.  Those living paycheck to paycheck have been struggling under the weight of inflation for at least the past year – with many not understanding or able to relate to the bright economic statistics posted monthly.

Those upper end consumers are now in for a shock – literally in economic terms and figuratively.  If the markets have a significant and sustained pullback, the psychological effect on upper income consumers will be real and material.  Economists call this the “wealth effect” as consumers spend more freely when they feel wealthy.  That’s about to be tested.

When these same consumers start to feel like they can’t predict the outcome of an election – and thus how their investments will fare under one administration or the other – they move to the sidelines.  Do they want to invest in EV’s or oil companies?  If the answer is unclear, they sit on their hands until there’s reasonable certainty. 

Does war in the Middle East and Europe spread to South America or Taiwan?  More uncertainty, more risk.  More reasons to pause spending 

While the potential national disaster affecting the Southeast will likely be contained regional event, the implications can also hit national financial markets.  Insurance rate increases have been one of the most stubborn components of inflation.  Florida and South Carolina already have some of the country’s highest rates, and it’s getting harder to get coverage in coastal areas anywhere in the country. 

A catastrophic event and resulting claims could force these rates even higher – and push the country toward a period of stagflation.  The last thing the Federal Reserve wants is for inflation to reignite while the economy shows real signs of slowing. 

That’s a lot to chew on to start the week.  By the time you read this in print, some of the answers will already have begun to reveal themselves.  Others will take more time. 

For your own personal view on the above events, I urge you to look beyond the blips that occur day to day. We’re a resilient people when we stay positive.  Storms of life – real and metaphorical – will come and go.  We deal with them and eventually move on.  

Look beyond today’s weather forecast.  Sunny days lie ahead.  Resolve to ride out whatever is thrown our way until we get a forecast that is more clear.