Market Outlook
here’s a look at the near term setup in the economy and markets as well as some historical perspective. The short term is challenging, but the longer term outlook is sound.
Winter Reckoning
Take a moment to acknowledge that we’ve been through a lot. Covid, cultural and political turmoil, a land war in Europe? Life happens fast, and a lot of what happens isn’t under our control.
Good Governance
My family lives on a nice street in a pretty good neighborhood in Greenville. However, we had a house on our street slowing falling in. The neighbors wanted that eyesore torn down. I really got a kick out of how much it bothered everyone.
The Bond Market Is Interesting (for the first time in a decade)
We know you haven’t enjoyed this year in the markets. But one good effect of bad markets is better pricing and better opportunity for future return. Bad markets are good for long term investing.
This is the most interesting bond market we’ve had in more than a decade. Here are the changes in treasury yields this year- and over the past decade.
A New Era
Inflation has finally forced the Fed’s hand. For the past 17 years we’ve operated in a low inflation environment that didn’t punish us too harshly for money printing and big budget deficits. Interest rates trended lower over a few decades, and with borrowing costs falling, borrowing money became an easier political strategy than raising taxes.
Dog Days of the Bear Market
This has been a tough year for investment markets with rising interest rates producing a common result for investments of all kinds, in dollar terms:
This is Not The 1970’s
And that’s what makes a market. There are intelligent, experienced people in both camps. From our point of view, inflation is headed in the right direction with oil prices down pretty consistently over the past two months, with some retailers cutting prices, the housing market stalling, and with the prospect of some layoffs on the horizon.
Nibble, Bite, Swallow
Well, we’re not in no man’s land anymore! The markets turned hard over the past few weeks on the threat that inflation would stay higher for longer and that the fed might raise interest rates farther than expected.
Where It All Began
I got my first job after college by going to the job fair my senior year. I talked to the guy in the best suit, and he worked for MassMutual. Geno became my first professional mentor and a friend. He talked about financial planning and investing. Helping people make good decisions made sense to me.
No Man’s Land
It’s not too late to rebalance. You can still choose to get your risk levels right, but these decisions get more difficult than they were a few months ago.