The Federal Reserve’s actions going forward are critically important to this market. Last week, Powell and Company decided to raise rates by .25%, as expected. Powell indicated he will increase rates by an additional .25% at each of the next six Federal Reserve meetings this year.
My guess is if the Ukraine/Russia conflict was not happening, Powell may have raised rates by .50%.
Inflation is running hot (old news) and the Fed is “behind the curve.” I will not be surprised if the Fed, does in fact, raise by .50% at one of the next couple of meetings, unless demand quickly starts to fade.
I’m thinking inflation is “starting” to peak. With the weather turning warm, an extra hour of daylight, and our pent-up demand, significant consumer spending may continue for a while. Factoring the supply chain issues, inflation may run hotter before starting to chill out.
The Fed and many others do believe inflation will moderate later this year as higher rates start to reduce demand, and our supply chain issues show improvement. I can only hope that the supply chain issues do in fact improve and demand does not fall off a cliff!! Chairman Powell, you are front & center!!
The market showed relief last week, now knowing the Fed’s actual intentions and of course, an oversold market, at least in the short run.
Markets Last Week
Last week the markets soared higher with the Dow Jones increasing 5.53%, the S&P 500 6.19%, the Nasdaq Composite 8.20% and the Russell 2000 5.43%.
International stocks did not disappoint as foreign stocks gained 5.63% and emerging market stocks up 3.51%.
So, have we hit a stock market bottom? Again, over the weekend the press was filled with thoughts from the rally is a “dead cat bounce” all the way to the market is definitely a buy. Many very credible people now disagree with the markets short-term direction. They will change their minds, just as quickly as the market! I don’t like the expression “dead-cat bounce”, however it sometimes is used to describe a market that bounces off a low for no good reason other than an oversold market.
Keeping a truly diversified portfolio and anticipating your income needs is still the prudent way to invest. Keep in mind, the stock and bond markets don’t rise every year. Down turns in the markets are typically followed by up turns that propel the markets higher. Patience can be challenging, however with your money, its very necessary and it is truly a virtue.
Bond yields continue to move higher with our 10-Year Treasury ending the week with a yield of 2.15%. The 2-Year Treasury yield finished at 1.95%.
The relationship between the 2 &10-Year is closely watched. History suggests that when the 2-Year yield moves higher than the 10-Year, a recession may be in the offering in the future.
As I’m typing, the 10-Year has moved up this morning to 2.232% with the 2 year @ 2.009%.
US Bonds on average are down (5.2%) this year. Global bonds are following suit, losing (5.5%).
At some point, US Treasury yields will become attractive. Hopefully NOT sooner than later!!
Brad McMillan to offer client webinar – This Thurs (March 24)!
Clients will receive an email from us by tomorrow with information on an upcoming webinar, hosted by Commonwealth’s CIO, Brad McMillan. Brad will discuss the Russia/Ukraine crisis, and offer his observations. He will also address specific questions that webinar attendees can pre-submit. If you have any specific questions you would like submitted, please email Ellen (ellen@RetirementRefined.com) the question and she can forward it on.
The webinar will take place this coming Thursday March 24th, @ 4:00pm EST. More details to come on how to RSVP (If you are unable to attend this live event, we will be happy to send you a link to access the replay after the call). . Please note, since this webinar is hosted by Commonwealth, we will not be able to assist if you are unable to logon to the webinar.
I’ve had the pleasure of listening to Brad through several webinars to Commonwealth affiliated advisors. His insights and wisdom are extremely valuable and respected. I definitely suggest tuning in!