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With all this market turbulence, is the plane going to land?

“Buckle up, folks — we’re about to experience some heavy turbulence.”

We’ve all been on a flight like this, where the captain comes on the intercom and warns us that we’d better strap in for a bumpy flight. It’s never a good feeling to careen thousands of feet in the air while the plane shakes and dips for seemingly no reason. You can always tell which passengers have lots of experience with this sort of thing, as well as which flyers are a lot more skittish.

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.

When we last updated you, we had seen a reduction in inflation for four consecutive months to end 2022, and that’s a good thing. It looks like inflation may have peaked in March of 2022. That said, over the last 45 days, we’ve had revisions to many of these numbers that suggest inflation isn’t plummeting off a cliff, but rather floating down like a feather. While the market has had a bounce, over the last 10 days it is adjusting to the reality that we will still have higher inflation for a while. The Federal Reserve may be mostly done with its rate hike cycle, but the fight against inflation continues. 

Why is that? Within the last week we had a very strong retail sales report that came in at 3% in January vs. the 1.9% that the Fed anticipated. That signals that the consumer has not cut down spending, and, unless we get a shocker this week, I would be surprised if the Fed doesn’t raise rates two or even three more times. 

The recent rally in bond yields and the U.S. dollar tells me the market is anticipating the same thing. But this week’s release of 2022 Q4 GDP and the core Personal Consumption Expenditure price index will tell us a lot about how both the consumer and the economy as a whole have responded to rate hikes, and we may see the bond market give back some of its gains in response.

But enough with the details — what does this mean for how we’re managing your portfolios? Well, one thing we’ve done with our overall asset mix is add to some dividend-paying companies as well as energy ETFs. Oil and natural gas market prices are seasonally low due to the warm weather across the U.S., but we don’t expect these energy prices to last forever. (And if you’re the one person who does, email me. I’ve got questions.)

As I told you recently, investing is really buying assets, and those assets are on sale. We’re positioning ourselves to benefit as energy prices are expected to rebound while managing all of your investments wisely and — most importantly — without panic. 

You see, I’m an experienced flyer. I don’t know if we’re about to completely pull off the “soft landing” best-case scenario you’ve probably read about, but I do know that turbulence, while it can be scary, is normal. Let’s stay the course, turn off the Chicken Little talking heads, and trust that our companies are working just as hard toward their financial goals as you are toward yours.

Now would be a great time to see how you’re positioned to weather the turbulence and talk about ways to fortify your standing moving forward. Contact us today with any questions or to see how we can help.

Article by David Smyth, Senior Partner at Family Financial Partners — a financial services firm in Lexington, Kentucky.

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