February was an interesting month for stocks and bonds. We pulled back from January’s highs, which wasn’t entirely unexpected considering the S&P 500 was up over 8% at one point. The markets are now battling expected Federal Reserve news with corporate earnings. This is the reason I think February was so interesting. It’s almost like you could tell investors want to get back to corporate earnings and away from so-called “Fed-speak”. However, the Fed is just too powerful to ignore. We might be stuck in this battle for a few months as the direction gets sorted out. I still think the Fed raised rates too fast, and they will feel the effects of this later on this year. I’m hoping this happens by mid-year when they tell investors that they are done raising rates, or maybe if we’re lucky, they will need to reduce rates a bit. Either outcome would probably be excellent for both stocks and bonds.
The consumer is still quite powerful in their pocketbook. This strength is what worries investors so much. If the Fed keeps raising rates to try and harm the consumers’ spending habits, but it doesn’t work, then how high will they think they have to go is the question. From there the Fed must avoid killing the labor market while keeping spending in check. It’s a delicate balance that will decide if we have a “soft landing” (barely noticeable recession) or a “hard landing” (long, drawn out stagflation).
Did you know?
Required Minimum Distributions are now changed for some due to Secure Act 2.0? If you turn 72 this year, you do NOT have to take an RMD this year, but you will be required to take an RMD next year. RMD updates will happen again in another 10 years for those in their early sixties. In 2033, the age increases to 75 years old before the requirement takes effect.
Thank you for your trust in us! Enjoy this last bit of snow and fingers crossed for a wonderful March!
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The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All investing involves risks, including the loss of principal.