How are you doing? How is your fall shaping up? Any gorgeous photos to share? (hit my email “reply” or post them back to us on social media and send them to me!!) As I mentioned in my previous letters, we headed out to the Central Coast of California for a family wedding. We were able to travel the Pacific Coast Highway, starting in Monterey/Carmel by the Sea, driving down through Big Sur, and ending up near San Luis Obispo. If you haven’t done this trip, I highly recommend it. Magnificent views, breathtaking drop offs, and ocean views follow you along your way. But like investing, stay focused on what matters, otherwise you may find your car rolling down a cliff and you just might never be heard from again. Here are a few of our photos.
Now let’s talk about markets for a minute. The most recent inflation data shows that inflation continues to persist near recent highs.1 Although we are seeing signs of easing, remember we didn’t get to near 9%+ inflation overnight, nor should we expect to normalize back to 3% inflation in a short period of time. Patience will be the key.
As anticipated, the Federal Reserve raised interest rates again yesterday.2 Expectations were for a 75 basis point increase, and that is what the Federal Reserve delivered. However, even prior to yesterday’s move, there was a shift in thinking what the December rate hike may be. Just 30 days ago if you polled forecasters, most anticipated another 75 basis point rate hike to take place in December. Within the last few weeks, this level of expectation started to back off to 50 basis points. And Federal Chairman, Jerome Powell, in his comments yesterday after the rate announcement, confirmed “the Fed may indeed slow its pace of rate hikes starting in December…” but also mentioned “the Fed is nowhere near done raising rates”. What does this mean? My take is we may be closer to the terminal rate (peak Federal Funds rate, before the Federal Reserve would consider trimming rates back). For those of you keeping score at home, peak inflation may be in the rearview mirror and the Federal Reserve looks to be closing in on their last rate increase in early to mid 2023. I don’t have a crystal ball, so we can all stay tuned to see what the Fed does this December…
Does that mean a recession is inevitable? Are we passed the bottom or are markets going to fall further? It’s hard to say. We won’t know for sure how things will play out until long after current events are over. The good news? Markets typically don’t wait for an all-clear alarm bell to ring. Markets, by definition, are a forecasting mechanism. From my view, they’ve priced in a solid recession to arrive, most economist believe a recession is coming, as well as most individuals we talk to. If everyone is anticipating this, will it happen? One thing is true, uncertainty won’t stop the media from churning out scary headlines and flawed predictions.
Instead of speculating wildly about what the future brings, what if we look for lessons and guidelines we can follow?
4 Lessons About Life
- Count your blessings. There is so much in our lives to be grateful for.
- Cherish your most important relationships. They’re what truly matters, especially when the road gets rocky.
- When you think of something positive about someone, tell them right away. It might be exactly what they needed to hear today.
- “Experience is what you get when you didn’t get what you wanted.”3 (Randy Pausch said this. His book, “The Last Lecture” is well worth a read.)
5 Lessons About Markets
- Markets can keep falling for a lot longer than we’d like.
- Market bottoms don’t come with an all-clear signal, and missing the best days of the market can really shockingly damage your long-term growth, i.e. if you missed this October 2022, you may have missed the best October monthly return in a long time.
- Don’t panic and make sudden decisions. One bad decision can destroy years of good ones.
- Stocks historically deliver strong growth over time.4 But you only benefit from it if you can withstand the painful periods that come with the territory.
- You can’t avoid all risks. You CAN identify them, manage them, and focus on what’s in your control. (That’s what I’m here for!)
What lessons have you learned about investing and life?
Here’s the bottom line: Reaping the rewards of long-term investing means taking the good times along with the bad.
The end of a bear market looks an awful lot like the middle, and investors who panic, sell, and miss the ride back up regret it.
That’s because the best days and worst market days tend to cluster.5 Sit the bear market out, and you’re likely to miss out on the whole play.
Send me a message if you need some reassurance or if we need to address any immediate concerns. We’ve been having many client calls over the past weeks, that’s what we’re here for.
Sending warm thoughts,
Jeremy Ftacek, AIF®
Ftacek Financial Services, LLC.
We work primarily by referrals and appreciate your introductions.
Illinois Office: 1000 Essington Road, Joliet, Illinois 60435 | 815-577-9125 | Fax: 815-577-9135
Tennessee Office: 4018 Kings Camp Pass Arrington, Tennessee 37014 | 615-591-2490 | Fax: 815-577-9135
P.S. The application for student debt relief is finally open here. If you’re eligible (or think you might be), please get your application in as soon as possible so it gets processed before the pause on federal student loan payments ends on December 31, 2022.
Chart Source: https://www.putnam.com/literature/pdf/II508.pdf
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