As we move through October, the financial markets continue to be bumpy on a day-to-day basis. Conflicting data abounds, one day a stronger than expected employment report and the next an inflation number that is considered too hot. The Federal Reserve keeps raising interest rates to try and slow things, but the economy is stubborn and continues to show strength. Corporate sales and profits are better than expected, but companies are worried about 2023 and many economists predict a recession by mid-year. What are we to believe will happen?
First let’s peek behind the curtain to get a better feel for things. Stocks, bonds, real estate, autos, and other fast-growing assets from 2021 are all experiencing nasty corrections. Of these, investment markets are typically the first to fall as they are forward looking, followed by other markets. Employment and inflation will lag in their reaction to higher rates, but signs are beginning to show some weakness is beginning to emerge. The bottom line: we have a lot of financial stimulus still left in our system that keeps this economy stronger than expected. Think of the economy as a freight train, it takes a lot of resistance to slow it down, so expect the Fed to continue to raise rates.
In the last week the financial markets are showing signs of a possible recovery. Bond interest rates are falling, and stocks are improving. Remember these markets are the first to correct, but also tend to be the first to recover. Prices of great American company stocks and high quality bonds are at bargains not seen in years, and we continue to monitor the markets to determine when to deploy capital. Until the economic cloud over 2023 begins to lift and the economy comes into better focus, we are cautious and will be adding investments with some principal protections built in. We also will look for opportunities to add to some of our favorite investments.
As always, please don’t hesitate to reach out with questions or comments.
Have a blessed day!
Securities offered through Commonwealth Financial Network, Member FINRA/SIPC. C F Parks Inc is a Registered Investment Adviser. Advisory services and fixed insurance products and services offered by C F Parks Inc are separate and unrelated to Commonwealth.