Now that “back-to-school sale” time is over, we see the retailers setting us up for the approaching holiday season. It seems like it never stops! Along with the “peer pressure” retail sales, many people are being squeezed by the cost of gas prices, and some worry over the fact that the value of their home has dropped, or that their job may be in danger. But there is good news – most of us have seen this before and persevered.

Capitalist markets tend to rise and fall in cycles. Will the stock market recover? How about the real estate market? The answer is yes of course, if history is any guide. Recently, I read a forecast from Dan Laufenburg, Chief Economist for Ameriprise Financial, suggesting that the United States economy will actually skirt a recession, by definition, this year; but we may end up in one next year, beginning in the second quarter. As I write today, Laufenburg happens to be in the minority camp of economists who instead believe a recession will happen sooner. He also suggested that inflation may become a problem and the Federal Reserve may need to raise interest rates before next year to combat it. I wonder what rising interest rates will do to home mortgage rates and the real estate market in general? I suspect that neither the stock nor bond markets will like the answers. But, only time will tell.

Another real question is - will the fear of not being able to borrow money in an emergency, or being pinched for cash by the cost of gas, get inside our heads and suppress the natural urge to spend money this holiday season? If American consumers, who make up roughly 70 percent or more of our economy’s GDP (Gross Domestic Product), slow their spending it could continue to hurt our economy. In recent history, we usually just spend our way out of slow economic times. And, already we have heard reports of discount retailers posting better sales and profits compared to department stores and some high-end retailers. You can bet that department stores and high-end retailers will fight the big discounters (such as Wal-Mart) for a share of your gift-giving dollar, by hosting aggressive sales and promotions during the upcoming holiday season. So, we might not need to limit our shopping to discount stores for all of our holiday spending in 2008! There may be some impressive deals to be had at department stores.

I strongly believe the best advice continues to be to hang in there with your investments and house. If you don’t need to sell now, does it really matter what the current price is? This could be said for both stocks and homes. With that said, it is critical that you know your risk tolerance and make sure your portfolio is aligned with it. Diversification continues to be the best strategy to minimize risk in a portfolio, by utilizing different types of investments. Natural resource mutual funds, for example, have been a great diversifier over the past 24 months. Consider consulting a professional financial advisor if you have any question about whether or not you are properly invested during these volatile times. If you have an advisor, don’t put off the meeting she is asking you for. Your money and future goals are too important to leave unmanaged.

Russel Phelps is a Certified Financial Planner™ with Ameriprise Financial in Folsom. He can be reached at 916-351-0000 or [email protected].