As the Biden administration continues to do everything it can to push up wages (minimum wage increases, banning non-compete clauses, pro-unionization policies, "Buy America" provisions) the Federal Reserve continues to do what it can to suppress inflation.

For the Fed, the most important way to suppress inflation is to ensure wage inflation does not take off (too late!) or become entrenched (has not occurred yet).

So we have a rather critical struggle going on at the very apex of economic policymaking. The outcome of that struggle will determine the path of interest rates, bond prices, and ultimately, the equity markets.

The residential home market continues to founder. Sales of existing homes continued to fall in December and are down by over a third since December, 2021.

What about prices? Although they are still up on a year-over-year basis, that rate of increase has fallen to just 3%. And with prices down 10% over the past six months, those annual rate of change figures will soon be negative.

Where from here? Mortgage rates have fallen a bit recently, and a low supply of homes on the market should support prices a bit. Affordability continues to be a huge drag on the market, and it appears many homeowners do not want to sell and lose their locked-in mortgage rates.

After enduring a brutal nine months, equity markets bounced back and ended the 4th quarter solidly ahead. Sadly, these gains only partially recouped the losses incurred during 2022. Triggering the upswing were indications that inflation was beginning to moderate. International stocks were particularly strong, as was the energy sector. Bond prices also rose during the quarter, breaking a string of three consecutive declines.

Today's CPI report shows that inflation - despite the respite from gasoline and other commodities - has become more widespread and is actually accelerating for most non-energy items.

As I have been noting recently, the Fed's efforts to restrain the economy have shown no results yet - with the exception of a pause/minor retreat in the house price boom - and as a result, volatility (which equals uncertainty, not declines!!) will rule and investors will have to come to grips with that for the near-term future.

It's clear from all the happy talk I keep reading in the WSJ and from other cheerleaders that the reality of the inflation struggle hasn't yet been internalized in the investing environment..

IIt truly is a globalized world. Europe's dire energy situation will continue to affect American consumers of natural gas. American exports of LNG will continue at the current elevated rate with little reason for optimism surrounding the European security environment. And thus, natural gas prices here in the US will stay high, and could potentially increase further depending on the weather and geopolitical developments.

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.