The market is up this morning as the bulls try to reverse the downturn. Is the worst behind us? It is way too early to call a bottom but if you are investing for the long-term of at least 3-5 years out, you probably will be fine. However, let’s do a quick recap of the US economy.
What is going on? Pending Home Sales squeaked out a small increase of .8% month over month (MOM) in February. This is on top of a large gain in January of 8.1%. Year over year (YOY) the number was down 21.1%. Interest Rates finished at around 7%, a 1% increase in cost from the start of the month. As the CCI demonstrated yesterday, consumer confidence is high, and people are trying to buy a home before interest rates continue to go up. Inflation is all around us. The Fed is probably going to continue to raise interest rates. Energy prices are moving up. Layoffs are being announced across the board. We haven’t seen the full effect of all the negatives yet. We are starting to see it. Buying a house is more expensive. You probably know someone unemployed now. The list can go on…
The question is when and how hard will the recession hit. The consumer is holding up fine, but this doesn’t seem to be the reality of what is to come. The data shows that the economy should be slowing. High interest rates are bad for business. The layoffs are bad for the economy, but the job market remains strong. How long can the consumer hold on? Savings are being depleted. Credit cards and debt are rising. These are bad signs for the economy so the question is will this be a soft or hard landing. We suggest keeping the long-term focus on quality stocks, dividends and a long-term focus. If you need cash soon- Treasuries and Money Market funds might be the best solution. A laddered bond portfolio is a good strategy for immediate money needs. This is discussed in the article Building a laddered bond approach- A must know strategy!
For comments or feedback email us info@fiscalinvestor.com.