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Today's Economy T Navigating By Paul D. Guerra HE CHALLENGES OF the current economy haven't been seen or experienced in our country in decades. Like most investors, you may wish you could figure out some way to know when economic conditions are about to change, or what adjustments you should make in your portfolio based on current conditions. Economists disagree about the nature and causes of economic cycles. But most agree that changes in economic activity generally follow four phases: advance or expansion; peak; decline, slowdown or recession; and trough. Advance or expansion. When times are good and the economy is growing, we typically see indications such as falling unemployment rates and factories taking advantage of excess capacity. While the news during this phase is typically positive, you may soon start to see signs of problems ahead. If inflationary pressures begin to creep in, this is typically when the Fed raises interest rates in an attempt to help keep the economy from overheating. Peak. By the time we get to this point, the economy tends to be operating at full employment, factories have generally used up their excess capacity, and inflationary pressures are usually building. When rising labor and materials costs squeeze companies' profit margins, the Fed will usually move more aggressively in an attempt to slow growth by raising rates to help ease inflationary pressure. Decline, slowdown or recession. Ideally, action by the Fed to tame inflation should allow the economy to gradually adjust to a sustainable long-term growth rate without the threat of inflation. In reality, however, the combination of the Fed's tightening and the need to correct accumulated imbalances in labor and materials supplies typically slows growth to a level that's actually below the economy's long-term potential. Unemployment rises, factories slow down, and inflationary pressures ease. Trough. At this point in the cycle, inven- tories are depleted. The Fed lowers interest rates in an attempt to help stimulate the economy, and businesses and homeowners may consider refinancing mortgages to take advantage of lower rates. Companies will eventually purchase new equipment and expand operations, helping inventories to grow and marking the beginning of a new expansion. As you can see, there are some telltale signs that offer some idea of where the economy is in its cycle. However, to make matters more complicated for you as an investor, the stock market tends to move in advance of the economy, usually in response to investors' anticipation of what they see down the road. The biggest challenge is knowing when the shift to the next phase will occur, because predicting the market and the economy is a bit like forecasting the weather. As an investor, your level of concern for economic fluctuations will depend on several factors. You may pay less attention to them if you have a long term approach and your portfolio is positioned to weather the ups and downs. Alternatively, you may see this as a time of opportunity to reposition holdings or even add attractively priced securities to your portfolio. Paul Guerra is the president of Brookshire Wealth Management in Canton OH. Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Brookshire Wealth Management is a separate entity from WFAFN. DISCLOSURE: Investments in securities and insurance products are: NOT FDIC- INSURED/NOT BANK-GUARANTEED/ MAY LOSE VALUE. ■ MANY WOMEN WITH OVARIAN CANCER HAVE SYMPTOMS BEFORE THEIR DIAGNOSIS* Help your patients know the symptoms of ovarian cancer (one or several of these for three or more weeks): n Abdominal pressure, bloating or discomfort n Increased abdominal size or clothes fitting tighter n Increased or urgent need to urinate n Pelvic pain n Constipation or diarrhea Ovarian Cancer n Nausea, indigestion or gas n Abnormal vaginal bleeding n Unusual fatigue n Unexplained weight loss or gain n Shortness of breath n Low back pain n Loss of appetite National Alliance *Recent studies in medical journals show that between 47 and 95 percent of women have symptoms several months before their diagnosis, even with early-stage disease. www.ovariancancer.org 202-331-1332