We might have kicked off a New Year, but some of the same old stories keep recycling and playing on like a broken record. I’m not sure where to begin but let’s tackle a few of the headlines from this week.
- The biggest head scratcher of the week has to be the issues in Washington and the election of a new Speaker of the House. The Republicans must be wondering how and where to go from here. The Democrats are simply sitting back (laughing) and watching the drama unfold. I don’t know about you, but I’m tired of it all. There are serious, ongoing issues in this country and reasonable heads need to work together to get things moving forward.
- Jobs and the economy. A simple word for both tells the story. STRONG. Unemployment remains low at 3.5%, the need for workers remains high and I don’t see any signs of this changing in the near-term. While strong might be slightly exaggerated when it comes to the economy, there is no question that the consumer continues to reasonably spend even in the face of inflation. We don’t know if this trend will continue the longer prices remain elevated but so far resiliency has ruled the day.
- Volatility in our markets remains elevated. One of our favorite sentiment factors, the VIX (volatility index), edged higher this week. We aren’t surprised by this. The anticipation of more actions by the Federal Reserve in addition to a new set of quarterly earnings is on the horizon again. I mentioned this last week, but I believe it bears repeating. Expectations for a bumpy start to the year are nearly universal. More work needs to be done before clarity and confidence return in any meaningful way.
As a follow up to point 2, Friday’s jobs numbers showed continued strength in overall employment, while wage growth slowed to some extent. This could be another indicator that inflationary pressures continue to weaken. We have seen other signs over the last few months, including the all-important CPI data (consumer price index) indicating that prices, thus inflation, are moving lower. We will get another CPI reading next Thursday that could continue the trend of declining prices overall. Could this be the start of several signs the Federal Reserve needs to see in order for them to consider an outright “pause” to raising interest rates? The committee will be holding their next 2-day session on January 25th – 26th. We will be watching closely.
On a positive note, a new year brings another opportunity to purchase an I-Bond. By now you are likely familiar with and have used this strategy we have discussed previously. The current rate on a new I-Bond purchase is 6.89% through the end of April. We still believe this is an attractive investment to consider with idle cash sitting in a savings account. Inflation is slowly subsiding, but the yield remains very attractive at these levels. I suspect that a year from now the inflation landscape will look much different as we turn the corner. As always, we are here to discuss and answer any questions you might have. I hope your New Year has started off strong!
Christopher E. Wasson, CFP®
Mosaic Asset Partners, LLC
1122 Kenilworth Drive, Suite 310
Towson, MD 21204
410.821.0089 fax 410.821.5993
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The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.