It’s safe to say that everyone was hoping to see the markets settle down in June, but it ended up being another painfully bumpy month. Ongoing volatility meant both stocks and bonds were under pressure amid inflation worries and rising recession fears. During periods of market turbulence, it’s helpful to recall a favorite Warren Buffett quote: “Don’t watch the market closely.”
The Oracle of Omaha gave this sage advice in 2016, when China’s economic issues, Brexit, and the Federal Reserve’s interest rate policy roiled the markets. Now, here we are in July 2022 and facing turbulent markets again, thanks to inflation, global growth, and uncertainties over the Fed’s interest rate policy. Buffett’s words remind us that pullbacks, corrections, and bear markets are an expected part of the investing process. Please reach out if you have any concerns, but in the meantime, take a break from watching too closely. That’s why we’re here.
Fed Rate Hike. In mid-June, the Federal Reserve announced a 0.75% hike in the federal funds rate, making it the biggest rate increase since 1994 and signaling its commitment to address inflation. The report from the Federal Open Market Committee meeting also indicated new rate projections, showing that all committee members expect rates to rise to at least 3.0% by year-end, with half the members expecting rates to rise to 3.375%. (The Wall Street Journal, June 15, 2022.) The 75-basis-point increase was a late-developing change from earlier Fed guidance of a 50- basis-point increase. The change of heart was in response to inflation data and rising inflationary expectations.
SCOTUS Decision. The US Supreme Court decision in late June to overturn the landmark Roe v. Wade ruling was definitely divisive (considered a hard-won victory by some and an upsetting defeat by others). In May, Treasury Secretary Janet Yellen testified before the Senate Banking Committee that restricting women’s reproductive rights would have “very damaging effects on the economy,” but only time will tell whether it will impact the markets or if there will be financial fallout from the decision.
Gun Legislation Passes. President Biden signed into law new gun legislation on June 25. Congressional bipartisan support was required to push the bill through. While both sides of the aisle say they made significant compromises, the bill does expand child and family mental health services, strengthens background checks for buyers under age 21, bolsters crisis intervention programs and red flag laws, and more.
Cost of Living Inflation Bump. As you might have heard, people are talking about a big bump in Social Security benefits next year. The Senior Citizens League says payments could rise by as much as 8.6% in 2023, compared to an increase of 5.9% in 2022. That would mean an average benefit of $1,658 for the 70 million Social Security recipients on January 1. What does this mean for you? Stay tuned as these numbers become clearer in the coming months.
We know market volatility and negative headlines can translate into worries. If you’re feeling concerned about anything, please schedule some time with our office – we’d be happy to review your plan and discuss any questions. Just give us a call.