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Chart Widening Productivity and Wage Growth Gap

A main driver of economic advancement, productivity growth has disappointed over the last decade. Considering the meaningful technological innovation in the U.S., one would expect stronger productivity growth. Instead, worker productivity has only increased by 0%-2% per year for the better part of the last ten years. Meanwhile, wage growth has steadily increased over the same time frame, creating a gap between worker output and cost. If this gap widens further, we expect businesses to experience increasing margin pressure. Businesses may still find a way to successfully integrate new technology and processes to drive productivity higher; however, it may take an increase in business investment to achieve.

Karen Rivot, CFP®, joined Allegiant Private Advisors in the spring of 2019 with more than three decades of experience in the financial services industry. As a senior operations specialist, Karen is a member of both the Wealth Advisor and Client Service teams. We recently asked Karen to share insights into her career and path to Allegiant Private Advisors.

Karen Rivot Color SmallI’ve been at Allegiant Private Advisors for almost 6 months now and I couldn’t be happier! 

Looking back, it all started with my first visit to Sarasota to escape the cold winters of upstate New York.  I came down in February and swore that I’d never leave - and I haven’t.  I love the blue skies, the beaches and the never-ending sunshine. Sarasota is truly a paradise; you won’t hear me complain. 

My investment career began many years ago in Venice, Florida, with one of the largest brokerage companies in the world.   As a new graduate from State University of New York at Oneonta with a degree in Psychology, I had a lot to learn, but I immediately fell in love with the financial industry and knew that this is what I wanted to do with my life. 

APA Jones 3x4HI RGBWith little fanfare, the Federal Reserve cut interest rates another quarter-percent in October. The cut was largely anticipated; more important was the Fed’s forward guidance on the future path of interest rate policy. The latest reduction now makes three consecutive rate cuts in as many meetings. While each quarter-point cut may not mean a lot in the grand scheme of economics, the series of cuts are beginning to have an impact. With some signs surfacing that the economic slowdown is stabilizing, has the Fed now done enough to kickstart the economy? From a historical perspective, three cuts were all that was needed to create an economic resurgence in 1995.

Could This Really Be 1995?

In July I wrote about the possibility that this could be 1995 all over again. In many respects, the very possibility of that was rather wishful thinking. And certainly, in many of my recent commentaries I’ve highlighted that downside economic risk appears higher than the off chance that the economy masterfully navigates the headwinds toward stronger sustainable growth. However, a few months and three Fed rate cuts later, the resemblance to 1995 is a bit more compelling. With inflation running below target, the Federal Reserve had the unique opportunity to cut interest rates to spur growth, just like in 1995. If successful, there could be more gas left in the U.S. economic tank. But how should we define success?

Third Quarter GDP Report 2019

Gross Domestic Product (GDP) grew by 1.9% in the third quarter, which came in above expectations of 1.6%. Many of the same characteristics carried over from the Q2 report such as growth in consumer spending and continued weakness in business investment. One notable change was a surprise return to growth in residential housing investment. As was the case in Q2, consumer spending was the largest contributor to GDP growth in the quarter, contributing 1.9% to the aggregate growth figure. However, consumer spending growth declined by nearly a third from Q2 to Q3 from 4.6% to 2.9%, which makes some sense given all of the current headlines that may be weighing on consumer confidence. As alluded to earlier, the business investment contraction worsened to -3.0% from -1.0% in Q3 from Q2 led by continued slowdowns in equipment and structure investment. This continued worsening in business investment is, to some degree, expected given the current economic and geopolitical uncertainties that business managers are up against. As discouraging as business investment was, residential housing growth made a great effort to bring some positivity to the gross private domestic investment segment. Residential housing delivered its second quarter of growth in the last 10 quarters, which is an encouraging sign that the current Fed rate cutting program is enticing consumers to get back in the housing market. Net exports detracted 0.08% from GDP growth as exports grew 0.7% in the quarter compared to 1.2% growth in imports, and although the dollar has marginally weakened recently, it still is a headwind to net exports. Lastly, government spending grew 2.0% and contributed 0.4% to GDP growth, led by federal government spending growth of 3.4%. Consistent with many other recent economic data releases, the GDP report showed that the U.S. economy is growing, albeit at a slower rate, and although consumer spending growth slowed, the consumer is who we will continue to look for growth.

Chart All Time High in Stock Market Amid Increased Volatility

Amid a myriad of negative political headlines and signs that economic growth is slowing, the stock market has proven very resilient and once again reached new all-time highs. The chart above shows a few key events that have taken place over the last year, including last year’s sharp pullback and the Fed stepping in and once again cutting short-term interest rates. While volatility has obviously been elevated, the markets have had a very good year on their way to a new record high. This can be partially attributed to the Fed’s action and the fact that while growth is slowing, it is still positive. As we move forward, new economic data releases will show whether the headline risks are feeding into the hard-economic data, or if political uncertainty is not enough to put an end to the longest economic expansion on record.

Survey Data Pointing Towards a Weakening Employment Environment Chart

Highlighted by record low unemployment and the recent return of modest wage growth, the U.S. employment environment has been a strong point for the domestic economy throughout the current economic expansion. However, as indicated by the gold line in the chart above, the rate of job growth has been slowing for most of 2019. Slowing job growth 10 years into an economic expansion makes sense, given that there is minimal slack left in the jobs market. Nonetheless, slowing job growth is a concern as any hit to the American consumer could threaten an already shaky economic growth picture. Survey data (black line) confirms that business managers are experiencing increasing difficulty with finding qualified labor as well as having to forgo new hiring rounds due to macroeconomic headwinds, namely the ongoing trade war with China. We expect that employment growth will continue to be weighed down as long as major macro level concerns go unresolved.

APA Kossoff 3x4HI RGBIn my letter that I wrote last December, I apparently did a poor job of communicating my transition from President to Chairman.  So, now, after many kind inquiries from all of you about how my “retirement” was going, let me say thank you, I love all the care and concern, but (fortunately) I am not retired.  The work we are doing to build and maintain a world-class business by helping clients attain their financial success is still so incredibly exciting and compelling to me that while this is my 23rd year with Allegiant, my 33rd year in the industry, and I’m not close to being done. 

If you have found yourself in the difficult position of researching divorce in the last few years, you may have come across the term “collaborative divorce.” For many people, separating from a spouse can be one of the most painful experiences of their lives. As such, it seems far-fetched that the process can be anything but contentious. However, collaborative divorce often provides a path for an amicable separation. Before diving into the details of collaborative divorce, let’s first review the other ways that a couple can divorce. 


Every month The Institute for Supply Management (ISM) releases a comprehensive Report On Business consisting of two separate reports, the Manufacturing ISM Report and the Non-Manufacturing ISM Report. The manufacturing report includes the Purchasing Managers’ Index (PMI); the non-manufacturing report includes the Non-Manufacturing Index (NMI). These indices represent a collection of survey data from purchasing executives throughout various industries regarding changes in business metrics over the previous month.

Month after month, year after year, the economy keeps chugging along. The longest economic expansion in U.S. history continues to astound many doubters. There are certainly reasons to doubt this expansion. On any given day there is an abundance of dissenters avowing why the current state of affairs is really different than what our experience is telling us. Up until now it has been hard to give much credit to the ever- present doubters. But, one day the doubters will be right. Even a blind squirrel finds a nut sometimes.