Summer Market Update

Time for a Big Summer Market Update

Picture this: We’re all on a grand plane, cruising high in the skies on Flight 2023 of U.S. Economy Airlines. Our destination? A stable inflation rate. But as any seasoned traveler would tell you, the journey often matters more than the destination. We’re all buckled in, but no one is sure if we’re in for a smooth flight or a bit of turbulence. At the end of our flight, will we have a hard landing or a soft one?

Navigating the Financial Skies

If you happened to doze off, here’s what you’ve missed during the inflight movie:

In 2022, amid worldwide events that included a global pandemic recovery, a global reopening, and a war in Europe, the U.S. faced inflation rates peaking at 9.1%.1 As we started 2023, prices improved but remained challenging, with inflation lingering at 6.4%.1 The pilots – or in the real world, the Federal Reserve – responded quickly by throttling interest rates to 4% in January 2023 and now to 5.5%.2 Predictably, these actions had a ripple effect on our entire economy.

Recently, a good-credit client got in touch with us about getting a mortgage for a new home. The bank offered a 30-year fixed mortgage at a whopping 8.1% rate. We don’t see the Fed cranking up interest rates much higher since the government needs to refinance almost half of our deficit in the next few years, and they want to avoid high interest payments just as much as the rest of us do.

While there were early forecasts of potential economic decline (a hard landing in our air travel analogy), so far, we’ve held at a good cruising altitude. The numbers speak for themselves. Inflation is currently at a more palatable 3.2%, our economy has demonstrated growth, and the job market is showing vitality.1

Many experts who once braced for a recession have turned optimistic, hinting that perhaps a smooth landing is achievable. We were born at night, but not last night. We’ll believe it when we see it. Hence our cautious approach to investing right now.

Understanding Our Descent

For those considering soft versus hard landings, think of it this way. A soft landing gracefully achieves our goal of stable inflation without causing a spike in unemployment. A hard landing is like a stretch of turbulence: rapid deflation, plunging revenues, and rising unemployment.

Much like flying a plane, there is an art to stabilizing inflation. It requires a delicate balance to ensure inflation doesn’t drop so dramatically that our economic engine stalls. It’s a task entrusted to our Federal Reserve, who’ve shown dexterity in handling such challenges before with varying degrees of success.

In-Flight Decisions

Our economic engineers, much like our flight crew, have a limited toolkit. Waiting out inflation has risks. History has shown us that price controls are a dicey game that worked during World War II but not when President Nixon tried them in the 1970s. Hiking interest rates aggressively to regulate the economy would be effective, but much like a high-altitude drop, it’s not for the faint-hearted. Fed Chair Volker took this approach in the 1980s by raising interest rates as high as 20%. That ridiculousness drove unemployment to a sky-high 10.8!3

The current approach by “Chief Pilot” Jerome Powell is to gently adjust interest rates, aiming for a soft landing. But remember, our plane is still airborne. And the metrics to measure a soft landing are debated. While the recent numbers might have us reaching for our celebratory in-flight drink, it’s crucial to keep our eyes on the horizon and stay alert.

Cruising Altitude and Beyond

While our economic indicators look promising, there are crosswinds to consider. Recent shifts in inflation and a slowing pace in job growth suggest we’re not set for a smooth landing quite yet. As interest rate hikes ripple through the system, sectors like banking and long-term U.S. Treasury bonds are feeling the heat.

Our current trajectory requires many in-flight corrections and is keeping us at a low-altitude glide as we seek to reduce risk and hunt for opportunities. Bonds and CDs are beginning to pay higher interest rates. There’s a shift from growth to value, we are seeing attractive investments overseas, and there are promising returns in the commodities and energy markets space. At the same time, we are looking for value companies who pay good dividends and some hedges to protect our portfolio from some of the turbulence.

Our Commitment in the Cockpit

While we’ve indulged the aviation analogy, the core message is crystal clear. This year has been mostly positive, but it’s still possible that a “landing” – whether hard or soft – is still far away. There’s work to be done in Congress with our spending plan and next year is an election year.

Right now, we are in a low-altitude glide. We’re on this flight together and the message from the cockpit is this: Feel free to move about the cabin, but for now, we think it’s best to keep the seat belt sign on.

Our team remains dedicated to ensuring your wealth management journey is as great of an experience as it can be. Your questions, concerns, and aspirations are our guiding stars.

Enjoy the rest of your flight!

1 “Current US Inflation Rates: 2000-2023,” US Inflation Calculator,

2 “Effective Federal Funds Rate,” Federal Reserve Bank of New York,

3 “Unemployment continued to rise in 1982 as recession deepened,” Bureau of Labor Statistics,



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