Last week the markets were up, then down, then up. Is anyone else getting dizzy? The overall outlook for the economy in general and stocks specifically is positive for the next six to nine months. The trouble spots are pretty obvious: geopolitical concerns, inflation, energy costs, and of course, the yield curve inversion we discussed last week.
On the bright side, initial jobless claims fell to their lowest level since 1968, and continuing unemployment claims are holding steady. There are just under 2 job openings for every unemployed worker, and unemployment is down to 3.6%.
The markets reacted to the notes from the meeting of the Federal Reserve Bank Board of Governors, “The Fed”. Remember that the Fed has a dual mandate – price stability and full employment. We’re good on the employment side, possibly too good. Price stability is another way of saying inflation, and that is well above the long-term average goal of 2%. The Fed stopped buying bonds, reducing the amount of money going into the system. In March, they raised rates by a quarter of a percent. Initially, indications were that rates would rise about 1% this year. Now, we may be looking at a 2% increase.
Inflation is too many dollars chasing too few goods. The Fed is making it more expensive to borrow money, trying to reduce the “too many dollars” side of the equation. When Congress works alongside the Fed, by reducing government spending and/or raising taxes, we often get a soft landing and a smoother ride. Historically, if the Fed is forced to raise rates sharply and to higher than normal levels, we end up with a recession.
If you’re working, market drops are a good thing. You can buy more shares for the same money. The worry becomes if you lose your job. We’re probably at least a year out from the next recession, so take this time to polish your resume, get another certification, and reach out to your network, just to touch base. As rates keep rising, pay down variable debt, especially credit cards, and build your rainy day fund.
Your action item to take this week is to check the hoses on your washing machine and clean out your dryer vent. You should have braided metal hoses, to help prevent leaks. And dryer lint is a leading cause of house fires. If your laundry room is in the basement, take the time to check your sump pump if you have one. Preventive maintenance is much cheaper than repairs later.
You can always find more information on our Facebook page, or our website at covingtonalsina.com.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. CovingtonAlsina and Great Valley Advisor Group are separate entities from LPL Financial.
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.