So Now What?

So Now What?

November 15, 2022

There have been several major events recently that will perhaps give us some idea where the market is headed in the future.

 The uncertainty surrounding the elections is over. It appears we will have a divided Congress.  Republicans will probably control the House and democrats the Senate.  This is important as the government seems to function better when there are checks and balances. In the past, the market has liked the idea of a split congress and has performed well.  The market views this as stability and nearly 100% of the time has gone up after mid-term elections. This is very good news.

The number one concern people have across the country is inflation. Again, the definition of inflation is too much money chasing fewer goods and services. In my opinion there is a simple way to bring inflation under control. If congress can reduce government spending, this will help with the amount of money circulating in the economy. Producing more would greatly stimulate the economy.  More competition has a downward effect on prices. The key to producing more goods is the cost of energy. Producing more energy would bring down prices at the pump. Over 150 household items use petroleum as a key ingredient to produce products.  Whether we like it or not, our cost of living to a great degree is tied to energy

The CPI (consumer price index) was released this past week. The CPI, or measure of the cost of living, rose less than expected. The market interpreted this as a sign that inflation is possibly in retreat. Therefore, the market in general was up the day following the report. Digging into the core data shows inflation was held down by a handful of categories that declined in October, with one major caveat. That caveat came from medical care services, which declined 0.6%, the largest drop for that category in more than fifty years. But that was due to the way the government tracks health care prices and adjusts once a year (in October) based on how often people go to the doctor. This drag on overall core inflation should not be expected to repeat in the months ahead.

The Fed still has a long way to go to get inflation around its target of 2%. It appears that inflation will continue to be stubborn. A soft landing, in my opinion, is still possible if as a country we reduce government spending and unleash our energy potential. The Fed cannot continue to fight inflation alone. It will require some help from the government. In my opinion, we can expect volatility and bull runs inside a bear market.

We watch your money every day and will do our best to position your account to take full advantage of all economic conditions to help you realize your financial goals. Be patient, there has always been a bull market once things bottom out.  In the meantime, we will continue to be conservative. Thank you for allowing us to help navigate your finances through these challenging times.

 Sit back and enjoy some football and family during the upcoming holidays. We all have so much to be thankful for!!