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The Great Rate Debate

While the Dog Days of Summer generally are not good for the stock market, this year has had a few more twists and turns than usual.

Add in a tight Labor Market and the highest inflation in decades, that puts all eyes on the Fed.

Signs that inflation may have already peaked are prevalent:
  • Gas prices have fallen for 88 consecutive days*
  • There has been a precipitous decline in mortgage and refi- applications
  • Shipping container costs have dropped 60%

So, it would seem that things are heading in the right direction, right? Unfortunately, the Fed has been widely criticized for being slow to act and isn’t likely to allow a smoldering fire to flare back up again.

While investors hope the data will curtail rate hikes, that doesn’t appear to be playing out. Raising interest rates is intended to put a damper on demand and slow the economy.

This, in turn, will help to ease inflation, but also brings a general slowing that could result in layoffs and potentially a recession.

Since stock prices are predicated on earnings and expectations of future growth, this is a speed bump that has led to volatility as expectations and prices get reset.

Where are we now?

We are experiencing a “good news is bad news” environment for the market, and vice versa.

  • When good economic or unemployment data comes out, it increases the likelihood that the Fed’s work isn’t done, and the markets move lower
  • Weak economic news, conversely, gives investors hope the medicine is working and little more will be necessary
All of this is normal, albeit uncomfortable.

Our consistent guidance is to invest for long-term growth that is much more predictable, making small adjustments to manage the short term. Having an appropriate amount of cash for anticipated expenses and opportunity, and a good amount of patience, will help as we move through the
volatility that is likely with us for a while longer.

Contact Sage Wealth Planning to help you navigate this volatility and its impact to your personal planning strategies.

Sage Wealth Planning does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.