April 2022 Update
Portfolio Strategy: The first thing I always consider in constructing the investment strategy is when do you need the money from the portfolio, how much and what risks are worth taking to help achieve your goals. When markets swing and more importantly, your account value swings, I know it can be unnerving. As such, it is important to have processes in place to determine if adjustments are prudent to make.
Recent trades: Last week, I did make some adjustments to the portfolios I manage to continue to try to mitigate risks from rising interest rates, and impact of the Ukraine/Russia war.
Economy: There are several things I am keeping an eye from the economy/market standpoint:
· Consumer Spending: This segment of the economy makes up a majority of GDP (gross domestic product – basically how much money the economy makes each year). There has been a slowdown in spending on goods (hello inflation!) yet there is a lot of pent up demand for services (things like travel and restaurants) due to easing of COVID restrictions etc.
· Earnings: We are about to enter corporate earnings season. This will be a pivotal one to give us insights into how inflation and supply chains are being affected in corporate America. Expectations are muted with all that is going on, which might be a potential positive if companies show they have been able to manage through.
· Interest Rates: You might’ve heard about the dreaded “inverted yield curve.” The yield curve is a chart of the given interest rate for a given period of time. In normal circumstances, the longer term the bond (or loan to a company/government from investors as a reminder) the higher the interest rates. However, there are times this does not hold true and the shorter term bonds might have higher yields, thus inverting the yield curve. Historically, when this happens, it is a possible sign of recession.There are many opinions on this so it shouldn’t be the only indicator we’re looking at. In addition to the yield curve recent headlines, the Fed (Federal Reserve) is indicating that it wants to get back to its normal metrics for jobs and inflation (2 of its key mandate areas). Since inflation has been high and the unemployment numbers are strong, the Fed is signaling several interest rate hikes this year.
· Inflation: For almost the past decade, inflation has been very manageable for the average household. Now however, inflation is at a four-decade high hitting 8.5% in March – as you’ve no doubt heard in the news. A lot of factors are at play here but the question remains does inflation peak and start going down at some point or is it here to stay. There have been some indicators on both sides of that so I continue to watch.
I know it can be a lot to take in. In addition, values are fluctuating regularly as news breaks.
If you have any questions or want to talk it through, I am just a phone call, text or email away.
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All data is provided as of April 13, 2022.