For those of you that were unable to join us last Thursday night, please click on our logo to the right or HERE to listen to our investment conference call where we discuss inflation, employment, recession fears, the federal reserve and what this all may mean for our portfolios.
Year in Review – Twelve Months Ending June 30, 2022
As much of the world adapted to and then attempted to move past the pandemic, policymakers and investors were left to ponder the economic impacts of the global tragedy. In some cases, the governmental efforts to combat the pandemic worked all too well. Demand exceeded supply for numerous commodities, goods, and labor, leading to an inflationary surge that rattled the Federal Reserve as well as markets.
Russia’s assault on Ukraine immediately placed further pressure on prices as well as depressing consumer confidence. Worries about recession came to the forefront in spring, rattling markets severely. As stagflation became one of the most searched words on Google, even well-diversified investors were left reeling.
For those of you that were unable to join us Tuesday night, please click the Play button below to listen to our investment conference call where we discuss potential paths for interest rates and the effects on housing and investment portfolios.
For those of you that were unable to join us last night, please click the Play button below to listen to our investment conference call where we discuss the recent high rate of inflation and how this may affect the economy and our portfolios.
Year in Review – 2021
Despite the desire to leave the pandemic behind, it continued to permeate virtually every aspect of our lives. Individuals, businesses, and governments strove throughout the year to adapt to changing circumstances. Investors were also forced to ponder the effects of the pandemic and to contemplate the ultimate effects on society and finance.
Governments continued to spend lavishly to ameliorate the economic suffering. The Federal Reserve maintained its zero percent interest rate policy and flooded the economy with liquidity. The twin efforts were probably most responsible for the strong moves in investment markets. In addition to the tangible impacts, Federal Reserve pronouncements and policies sent investor confidence soaring to stratospheric levels.
Lost in all the doom and gloom about the recent spurt in inflation is an emphasis on the most impactful cause:
The economy gained 6.5 million jobs in 2021 - by far the most on record. The unemployment rate plummeted, much faster than had been anticipated. And so yes, the economy recovered faster than was anticipated and some shortages developed. Including most importantly, of labor.
And yet despite the elevated inflation readings, interest rates have remained stunningly low, supporting the financial markets as we see every day.
Gradually, the economic gurus are coming to admit that calling inflation "transitory" was mistaken/misleading. The OECD is now predicting inflation of over 4% in the US - in 2022!!. No policymaker could credibly still categorize a 2 year spurt in inflation transitory.
The fact that predictions and forecasts made now are pre-omicron does not change the overall trajectory and the sense of alarm investors should be feeling now.
Despite the incessant and excessive hype concerning supply chains, the simple fact is that the manufacturing sector of the economy is booming. Perhaps it has called a bit over the past year, but still....these are good times and the pundits will have to search harder for reasons for despair.
Recent economic data are moderately encouraging from the stock/bond perspective. Consumer spending is still fairly strong, although moderating....and ditto for inflation.
It still is possible that when/if? the virus recedes in the coming weeks, consumer spending will surge as it did earlier this year. However, to me, this seems unlikely.
The impetus from the federal government will lessen significantly. It also seems reasonable to me that many, after seeing the over-promising of "life-to-normal" as a result of vaccines, will adopt more of a wait-and-see approach this time around.
Fueled by low interest rates and scant supply, the price of homes continues to surge. The rise of 14.6% over the year ended April marks the highest price rise since the S&P Case-Shiller index began 34 years ago.