Broker Check
Nearing Mid-Year 2023

Nearing Mid-Year 2023

May 24, 2023

It’s almost mid year 2023- What’s going on in the financial world?

We could always argue there is a lot going on in the financial world, but I think right now everything boils down to this:

Interest rates have gone from near zero 18 months ago to above 5% on the short end, mortgage rates are at 6.5% and corporate credit rates well higher than that.

Is the new higher interest rate structure enough to tame inflation, and how much effect is it having on employment and overall business conditions?

Inflation has come down, but likely not enough for the Federal Reserve to lower rates any time in the next 6-12 months. Employment has stayed strong, but wage gains have slowed up.

Business conditions have softened, but they are still strong enough in most sectors for businesses to be ok.

As for asset prices, they are pretty stable right now. Housing prices are staying high because no one can afford to sell their house and move because their mortgage rate is so low. Limited supply of homes is keeping prices high.

Stock prices are dominated by the top stocks in the S and P, but overall stocks have been mostly flat to down as the market tries to price in a recession.

Headlines and optics like the debt ceiling and potential default by the US government are very scary.

Have many people changed their allocations based on current events?

I don’t really think so.

We have heard from nearly every client in the last 90 days. It is almost unanimous that the higher rate structure finally allows investors the ability to get significant income from their investment portfolios without taking significant risk. Our clients are very happy.

Think about it. Money market rates are now approaching 5%! Nervous nellies are able to make 5% NOT investing. Income oriented mutual funds are starting to raise their monthly payouts and 6-7% in many funds with average risk is quite a great thing and something we have not seen for well over a decade.

Anybody out there have a mortgage rate at 3% or below? I know I do.

So we wait, we take our income, and we live within our means. AND we sleep well at night.

What do asset prices do over the next year or two?

I think the days of investing for growth where prices and multiples rise higher and higher are probably behind us for the next several years. Being paid 5-7% with little risk is a place that should get more and more investment money over time.

As always, call or email any time to check in and talk about things.

Wishing everybody a happy and healthy Memorial Day weekend and a peaceful and joyful start to the summer!

The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly