We maintain our favorable view of the US economy and stock market. As readers know, we had held steady with our favorable rating all year when the main media were relentless messaging a doom and gloom storyline and now reversing their positions. Yes, the US economy slowed down in Q1 & 2, but how could it not with the Federal Reserve aggressively raising the discount rate?
As mentioned in previous Briefs, the Federal Reserve lowers interest rates if they fear a recession. Their analysis apparently accurately concluded the economy had the financial momentum to absorb an increasing rate policy to slow an unsustainable inflationary trend. Had the Federal Reserve not implemented its rate policy, imagine the price of residential housing, energy, gas, and food. The latter is still rising based on recent trips to the grocery store. However, our opinion is the Federal Reserve acted correctly and timely based on lessons learned from the 1970s. Early in the year, you may recall main media feared the Federal Reserve would raise rates too fast and drive the US economy into an irreversible economic declining spiral that evidently prompted institutional investors to reduce stock allocations. The jury is still out on how the Federal Reserve will act and if they will implement a “soft landing” approach to relaxing their rate-raising policy.
We believe the market is in a positive uptrend and to buy on dips. The first half of 2022 has been an excellent buying opportunity for 401k participants with regular payroll contributions. The second half of 2022 may provide excellent returns for investors that start adding to their stock allocations should the market recover from the first half-year declines.
Call us if you have any questions about this Brief or your account. More importantly, we specialize in assisting in developing for you a well-defined financial plan with target goals which is a key to navigating through market volatility, especially in the previous couple of years.