Market Insight

Higher for longer. Over the past several weeks, those three words have spooked the stock and bond markets. The phrase refers to interest rates, and the Federal Reserve’s most recent projection is that today’s seemingly high interest rates might last longer than they and most of the world had previously anticipated. The Fed hinted towards the “neutral rate” (an invisible Goldilocks-like interest rate that keeps the economy growing but inflation under control) having to be higher than recently thought. Higher interest rates make borrowing more expensive for consumers and businesses. Thus, the fear is that the economy might eventually encounter the recession that economists have been waiting for over a year.

Avoidance and procrastination are natural enemies of goal achievement. To put off to tomorrow, what can be done today is a surefire way never to complete those nagging household chores, finally read that book your friend recommended last year, or cross the finish line feeling strong at a local 5k race. But, according to Nobel prize winner Richard Thaler, these same impediments to accomplishment could make you a better investor.

There’s no such thing as a free lunch. You know the phrase and what it means. Free hotel breakfasts, free checking, and free shipping all have associated embedded costs that we pay but don’t necessarily see. Everything has a cost, even money. The cost of money is the interest rate we pay to borrow it, and for the better part of the last 12 years, that interest rate has been near zero. And while free money seems like a dream come true, it too has costs, and this year we are paying the price.

Things are tough out there. The stock market is off to its worst start to a year since 1970. Inflation is at a 40-year high. Interest rates are rising. A recession could be around the corner if ...

It has been said that “far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves”. That sage advice would have come in handy at the turn of 2021. Remember, this year started with a riot on Capitol Hill…during a global pandemic. Following the insurrection, concerns about newly elected President Biden’s proposed tax hikes took center stage, only to later be overshadowed by inflation running at levels not seen since the early 80’s.

Last week, your brother-in-law gave you another great stock tip. He’s been trading a lot over the past few months and doing well. Very well. He is an architect but watches a lot of CNBC and combs social media constantly for great intel. To be fair, the market is at an all-time high, so most investors have done well and have been eager to share their wisdom. These days just about everyone is talking about the stock market and online trading.