We have reached mid-year and the dog days of summer are upon us. Most summers are laid back and uneventful, but not this year. In an earlier update titled Finding Calm in the Chaos, I discussed uncertainty in the nation and economy. Inflation remained high and rates would need to stay elevated to fight the inflation. To add to the nervousness, the Federal Reserve was walking a tight rope. They were trying to slow the economy and inflation by keeping rates higher for longer, but not so long as to send us into recession.
Little did we know that the Fed would soon be back page news as we witnessed an assassination attempt on a former President. Then, a current sitting President who was running for reelection, suddenly dropped out of the race after obtaining enough votes to secure his party’s nomination. While I privately said I wouldn’t be surprised at an attempt on President Trump’s life and I thought the election would be nastier than any before, never would I have guessed the turn of events that took place.
Markets don’t like uncertainty and had settled on a second Trump presidency, but now are back to not quite knowing what lies ahead. As a result, we have had some expected volatility. Don’t be surprised if this continues to be the case into the fall.
But enough of politics, let’s take a check of the economy and the markets. The economy continues to slow as unemployment has risen modestly, and the signs of a classic economic slowdown are starting to increase. This has put the betting game of when the Federal Reserve will cut rates in a fever pitch.
In prior years, the Fed would not make rate changes in the heat of a national election, but this year is proving that nothing is “normal” anymore. The financial markets love the weaker economic news and have rallied to new highs based on the premise the Fed will now cut rates…and cut them repeatedly.
The political backdrop will certainly make this A Summer to Remember, and the next 98 days could bring more madness. Thankfully, we have a long-term investment strategy of buying and holding stock of some of America’s top companies and reinvesting the dividends paid into more shares…thus letting the power of compounding work for us.
We will keep a keen eye on economic statistics as a recession could happen, which would bring volatility roaring back to life. Until then, we trust you have had a great summer to date and hope you Live Brilliantly for the remainder of the long and warm days.
Thank you as always for your business and friendship. If you know of anyone who could benefit from this message, please feel free to pass it along.
