Inflation, Interest Rates, the Fed…What Does It All Mean?

“I would not be surprised to see inflation peak at around the current 8.5% level and begin rolling over in the latter part of the year.” – Ken Melotte, June 2022

There has been a lot of focus on inflation and interest rates lately, understandably. But I’m not sure how well people generally understand the mechanics of what’s happening, why, implications, etc… so figured I’d briefly address it.

The Federal Reserve (“The Fed”) controls/influences a couple critically important things: (1) the price of money and (2) the quantity of money. Continue reading “Inflation, Interest Rates, the Fed…What Does It All Mean?”

Believe It or Not: Stocks go Up AND Down

There seems to be a lot of shock out in the world that markets are down as if people have forgotten stocks don’t go only straight up but also go down. I certainly understand it from younger investors who have really never been through a bear market / recession before, but I’m surprised to see so many more experienced people also caught off guard.

The reality is out of the 97 years from 1926 through 2022, the U.S. stock market was up 71 of those and down the other 26 years. That means, on average, stocks lost money in 1 of every 4 years. Continue reading “Believe It or Not: Stocks go Up AND Down”

Quick Follow-Up to “Bonds Haven’t Been Here…”

Last week I mentioned yields on Treasuries hitting (or even exceeding) 4% now. So, let’s bring this full circle.

Two weeks ago I wrote a note titled, “No, Stocks Are Not Cheap Yet.” And in that note I provided a range of returns for the U.S. stock market over the next twelve years under a variety of good, average, and bad conditions (see below).

 

The range of returns from this analysis was -5.4% to +3.5% annualized. That means even an optimistic case for U.S. stocks (at least for the conditions in the matrix above) is about a 3.5% annualized return over the next 12-years with an average expected return of about 0%. Continue reading “Quick Follow-Up to “Bonds Haven’t Been Here…””