Broker Check

Monday Money Report

| October 17, 2022

Bad news keeps driving stock prices lower.  We had a bit of a market rebound on Thursday before the markets declined further on Friday, leading to a loss for the week. Core CPI, or the Consumer Price Index when calculated without the volatile food and energy sectors, rose again by 0.6% last month, to 6.6% year-over-year.  A large portion of the increase is housing costs, as the cost of shelter continues to increase.[1]

Continued inflation indicates the Fed, or Federal Reserve Bank, will most likely increase interest rates again in November and December. We could be looking at a recession, or two consecutive quarters of negative economic growth, or contraction in the economy. Unemployment remains low, and job openings are still high, so this recession may not trigger large job losses and lay-offs.

If you are worried and still working, continue to build emergency savings and pay down variable-interest rate debt.  If you have a Home Equity or other credit line, see if it can be locked into a fixed rate. And keep investing and stay invested.  The focus while you are working is on buying shares, and right now you can buy about 20% more shares with every paycheck.

If you can’t help yourself, and you have to look at your statements as they arrive over the next two weeks, don’t look at the dollar amount.  Look at the number of shares you have and compare that to the number you had last quarter.

The positive side of rising interest rates is that savings accounts are slowly starting to pay a bit more interest.  And inflation means that Social Security and other pension payouts that are linked to inflation will be increasing in January. In fact, Social Security recipients are getting a double bonus, as Medicare premiums are declining $5.20. [2]

A twist there is the hold harmless rule.[3] In a normal year, both Social Security income and Medicare costs increase.  Some years, for some recipients, the Medicare increase is more than their Social Security increase, meaning their take home would be less. Under the hold harmless rule, their Social Security check doesn’t decline, it just stays flat. If this has happened multiple times, the entire increase this January may be taken by the previous Medicare premium increases. 

Your action item this week is a little strange. If you’re at the store and see something you want: a new throw pillow, holiday decoration, coffee mug, pick it up.  Carry it around the store with you, then put it back where you found it. The action of holding it and carrying it around with you gives your brain the same dopamine hit as actually buying it. If you want to ramp up savings, go home and transfer the money you would have spent into your savings account.

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Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. 

The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, contact the appropriate qualified professional prior to making a decision.

[1]The latest inflation report was the worst-case scenario for Biden, the Fed, and the stock market (