Fed Chair Powell: There isn’t a painless way to do this
What is it?
“‘Powell said very bluntly that the fight to bring down inflation would “bring some pain to households and businesses. We have got to get inflation behind us,’ he said on Wednesday. ‘I wish there were a painless way to do that. There isn’t.’”
With the labor market still relatively strong, the Fed is being intentional about creating price stability in the economy by raising interest rates.
Why does it matter?
Many investors have been blessed with outsized returns during the pandemic. However, we do not yet know how harsh those once elevated prices will continue to come down. While many investors have a long term approach, the risk appetite is not always in line with that idea. Many people want to see the values of their portfolios never come down from their all time highs. Regardless of that, they may want to be invested in risky assets which by their nature may depreciate more on a percentage basis than the overall market.
As mentioned in previous Market Insights, we will maintain a risk off approach for the most part. While we do have some exposure to risk, the majority of our funds will be placed in less risky assets until conditions change.
Are Bonds Back?
What is it?
For the first time in a long time, certain bonds are becoming more enticing than they were. The yields on some bonds are becoming more favorable than before as equities are in turmoil.
Why does it matter?
As we aim to help you reach your goals financially and otherwise, bonds are a less risky investment in some ways when compared to equities like stocks and ETFs.
If bonds start to recover in a more meaningful way, we will take advantage of those investment options as we see fit. Bonds, especially U.S. Treasuries could see an influx of cash flows as they are seen by many investors as a flight to safety investment.
Other articles we found interesting this week:
The stock market is not the economy in an important way
Central banks’ frenzy leaves a sour taste in traders’ mouths
Stocks fall for third day as investors mull rate hike, Powell remarks
Current 401(k) portfolio
Our last portfolio reallocation: 5/19/2022.
Want more information?
The weekly market insight provides a window into the process we use in our investment management process. At Breakaway, we believe markets are always changing and require a nimble yet data-oriented approach.
Our process attempts to identify trends and momentum in the financial markets. With that information, we align our clients’ portfolio accordingly in the hope to help our clients accomplish their life goals while attempting to lower the risk of a large drop in their portfolio.
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Sources:
*Sam Ro. “Fed Chair Powell: There isn’t a painless way to do this”. 9/21/2022. TKer. https://www.tker.co/p/august-fomc-75-bps-rate-hike
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