The Federal Reserve finally got tougher on inflation worries and acted aggressively this week by raising rates by 75-bps instead of 50. As of now, this has done little to ease the selling pressure but at least it seems like the right move at the right time. The committee members have basically admitted that they have been slow to react and needed to take a harder stance. It seems that another 75-bps increase is on the table now for the July meeting. We will have plenty of economic data to digest between now and then, which will help in the decision-making process. On Friday, the Fed promised an “unconditional” approach to taking down inflation in a report to Congress. You can read that article in a link I’ve included below. Chairman Powell is scheduled to appear before Congress next week to provide an update on monetary policy which will likely lead to many more talking points in the coming week.
I started these weekly updates in the very early stages of the Covid lockdown in March of 2020. My intention has always been to be open, honest, and direct in my assessment of the financial markets. We have had some good and bad times, like now, along the way. In my 33+ years of investing, I have always told myself I would be honest and transparent when it came to my opinions. Most of you may recall in meeting me that I spent nearly 25 years working with many of the world’s largest institutional investors. I also interacted regularly with many financial advisors along the way. The common theme I heard during those years is that advisors would avoid the bad times with their clients and go silent. Our role as your financial advisor is much bigger than that. Our role is to be your sounding board, understand your concerns and adjust accordingly. It may come with tough love sometimes but often we are encouraging you to spend money wisely and live your life (within reason of course!). We all know our limitations and generally how to moderate our behaviors when necessary. I suspect many of us are doing that now in our daily lives.
Today we are faced with a challenging environment. Simply put, no one is having fun right now. We are all faced with our own individual struggles during environments like we are currently experiencing. Good and bad. We each have our own challenges with paying some bills, buying groceries, and filling our gas tanks. We open our monthly statements and feel depressed by looking at the numbers. We can point the finger and blame, which is normal. The thing is, we are all in this together. No one is immune to what is going on. There has been nowhere to hide from what is occurring today in the markets. Stocks, bonds, gold or even cash, when adjusted for inflation, cannot provide the type of shelter we all seek right now. Yes, oil and energy have been a safe haven, but recall only a few short months ago we were all discussing alternative sources and “green” technologies. My, how the world has changed so quickly!
Here is what I know today. The world continues to evolve, but investments that seemed unreasonable from a valuation and cost standpoint, are now coming back into focus. Investment grade corporate bonds, treasuries and government issued securities are seeing increasingly better yields. For our retired clients, this is a welcome change. Deep value and high dividend paying stocks are looking very attractive again. For our younger clients, technology bell weathers are seeing price to earnings ratios reset lower and at levels that haven’t been seen in many years. There are advantageous opportunities in times like this. It may not feel like it today, while you are reading this, but I believe in a few short years we will reflect on this exact moment and be thankful that we stayed the course. Please know we are here to help guide and answer your questions. While we may not know all the answers, as always, we will do our best.
We are here for you!