Another Volatile Week
The latest inflation report came out on Thursday showing an annualized rate of 8.20%. While it was not unexpected that the number would be high, the markets had a positive reaction as they bounced off the March 2020 lows. As a follow-up, on Friday a report came out showing that consumer spending was flat in September largely in response to inflation concerns. With the Federal Funds Rate at 3.08% and an announced target closer to 4.5% we are likely to see inflation continue to slowly subside as rates increase. The next meeting of the Federal Reserve is scheduled for November 1st and 2nd and it’s likely we’ll see another .75% rise in rates.
These rate increases have started to impact the housing market as payments rise in response. As an example, a $400,000 loan is now about $700 per month more expensive than when the tightening cycle began. Not surprisingly these rate increases are also playing a hand in slowing car sales of both new and pre-owned cars.
The war in Ukraine continues to rage on with a recent development being the attack on the Kerch Strait Bridge between the Crimean area and Russia that was allegedly carried out by Ukraine. Repairs on the bridge are estimated to take until July 2023 to complete. This has led to retaliation by Russia in the form of drone and missile attacks on the civilian population which has led the Parliamentary Assembly of the Council of Europe (PACE) to declare that Russia is a terrorist regime. For the sake of peace, let’s hope that there is a quick end to the hostilities.
In economic news the third quarter GDP is scheduled to be released on October 27th and this may be a bright spot for investors. Goldman Sachs recently raised its estimate for GDP to show a 1.9% annualized growth in Q3. Let’s hope that they are right.
In closing I’ll leave you with a positive story about turning lemons into lemonade. A New Jersey comedian, Ariel Elias, was performing when she was attacked by a member of the audience. The individual threw a can of beer at the comedian and thankfully he missed. How did she respond? She picked it up and drank it to the enthusiastic encouragement of the crowd.
John M. Gehri, CFP®, ChFC®