Who spooked the heard?
Our U.S. Federal Reserve. Just this month they woke up. They finally said it out loud, “inflation is not transitory”. Gee, I am not smart enough to serve at the Fed level, but you can go back 18 months on these editions and see my time stamped comments of “inflation is not transitory and is here to stay”. Not that hard, really.
So, here we are. Valuations of Corporate America are high, inflation is absolutely nuts and the bullseye is to watch the Fed. As my favorite dead economist, Marty Zwieg always said, “Don’t fight the Fed”! Which, Marty usually followed up looking you in the eye and would say it again, “don’t fight the Fed”.
Right now, the Fed has publicly stated they will:
- Stop buying bonds in the open market that were adding support to our economy.
- Increase interest rates. In my opinion perhaps 100% above what has been publicly reported.
- Start reducing their balance sheet. Many economists suggest selling $1 trillion in balance sheet assets is about the same as increasing interest rates 1%.
Each of these actions is a headwind for Corporate America. All three combined hold the potential to be a “perfect storm”, AKA a potential return much like that of 2000 – 2003.
“No one knows the future”, yet we remain in full alert mode in our effort “to not make you poor”.
If there is someone in your work, social circle or family that would be interested in a “second opinion” around their investment allocation and strategy, feel welcome to share our contact information.
As always, our team and I are available to discuss this concept with you. Just call, email or stop by the office and say “Hi”!
James O. Lunney, CFP®
CERTIFIED FINANCIAL PLANNER™ Professional
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Investing involves risk. Loss, including loss of principal, may occur. No strategy assures success or protects against loss. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.