Lately, I’ve been thinking about why it is so ingrained in our human nature to worry. We’re a nervous species, fearing uncertainty, volatility, and anything that we can’t control. I’m in a business that exists primarily to take financial worry off the shoulders of our clients and manage it ourselves, but we live in a media environment that seeks to capitalize on fear without looking at the greater picture.
Here in Lexington, Kentucky, we may be in the dog days of August, but it just feels a little different this year, doesn’t it? I can almost sense the coming fall air as folks around me are preparing to go back to school and talking about University of Kentucky football. The Family Financial Partners team is making its way back to the office, and clients are starting to answer our phone calls as they settle into a normal schedule.
This has been a really interesting year watching the discussion of artificial intelligence advance due to the rise of ChatGPT and similar machine-learning tools that have permeated daily life and business. In order to learn more about the subject, I recently invited Brad Watkins, a self-described “technology evangelist” to our podcast, “In My Day.” Ryan and I had a fascinating hour-long discussion with him where he broke down what AI really is and how it’s going to affect our lives moving forward. I thought that, for this month’s newsletter, you’d like to read an excerpt from that conversation.
Last week was a big one in the market. We had a new bull market declared, and we saw the Federal Reserve finally pause its year-plus campaign of hiking interest rates. Let’s deal with the Fed first:
No rate hike, but are more coming?
While it did not raise rates, the Fed did raise its terminal interest rate, which is its target for where it sees interest rates going, by 50 base points, or a half percent.
Sometimes the best-laid plans don’t work out as you expected. My mother always said, when things don’t go your way, consider the “why.”
I believe that the Federal Reserve would do well to consider that message. We’ve just gone through a banking crisis caused in part by the Fed aggressively raising interest rates, which resulted in the closure of one of the largest banks in the U.S. and the sharpest decline in commercial lending on record. In the meantime, wage inflation and housing costs remain stubbornly high, while unemployment is historically low.
Nobody’s benefits renew in March. March is pretty much the opposite of benefits season. Many of you are just waiting on the fall email from your employer that reminds you to check your benefits and see if something has changed — marital status, number of children, medical history — as well as instructions on how to make changes to your package. If nothing significant has occurred, you probably just check the box to keep everything the same. It’s easy.
“Buckle up, folks — we’re about to experience some heavy turbulence.”
Why do I bring this up now? Because folks, we’ve experienced some heavy market turbulence lately, and while the skies are a little calmer right now, my guess is that we have more to come before this plane lands. But I’m an experienced flyer, and let me assure you, this is no time to get panicky with your portfolios.
2022 was truly an awful year as the Federal Reserve began its interest rate hike policy in an attempt to battle inflation. Speaking of inflation, I know that many of you have been frustrated by the higher costs associated with financing a new home, purchasing a vehicle, or trips to any retailer. Inflation, measured by the Consumer Price Index, rose by 6.5% in 2022.
New year, same problems.
However, there are several pieces of good news.
I recently introduced the classic board game Axis and Allies to my sons. Michael, my third-grader, asked to be Russia, and I was happy to let him. When it comes to his turn, as head of Russia, the first thing he did was invade Ukraine. I shouldn’t have been surprised – this is the same kid I used to hear randomly announcing (while floating in a sea of bubbles in the bathtub) that Amy McGrath was “too liberal for Kentucky!” Remember those ads? Can’t say he’s not paying attention! The daily flow of nonstop media really does affect us all.
I recently walked into a big box retailer which shall remain unnamed, and lo and behold, encountered the first Christmas decorations of the season. Now, don’t get me wrong, I love Christmas. I’m a big kid at heart after all. But I can’t possibly get into Christmas now when I haven’t bought my Halloween candy!
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