Client Conversations with Wealth Management

Many clients have questions about how today's market conditions will affect their finances and investments. At CRBT, we continue to evaluate the market to give sound advice to our clients. Take a look at a few common conversations we've been recently:

Interest Rates - Where are interest rates headed?

The Federal Reserve has indicated that the end of rate hikes is near. The market is expecting, at most, one or two more 0.25% increases in the Fed Funds rate over the next two meetings. This would position money market rates around 5-5.25%. The yield curve remains inverted, with short term rates significantly higher than longer rates. Last quarter we discussed that when rates act this way, historically it is a good time to buy longer dated bonds as the market is anticipating rate cuts and lower rates across all bonds. Long term rates are down sharply since the start of the year (a good thing for already owned long term bonds). The window is shrinking to purchase these types of bonds, increasing the need to be more selective.

Inflation – The peak is in, what’s next?

Inflation was at its highest level in four decades when the June 2022 report showed CPI at 9.1%. Inflation has peaked and is on a relatively rapid decline. March CPI came in at 5.0%, the lowest rate in two years. Some relief occurred at the grocery store for households as March prices fell 0.2%, the first monthly decline since September 2020. What remains to be seen is how the economy handles permanently higher, but hopefully more stable pricing going forward.

The Economy – Where are we headed?

Both stocks and bonds had positive returns in the first quarter of 2023. The traditional 60/40 portfolio was down 16% last year (one of the worst years on record) and has started this year +5.4%. Stock prices are up on better than feared 4th quarter 2022 earnings and the prospect of The Fed ending rate hikes. Bond yields dropped sharply (pushing up bond returns) after the closure of Silicon Valley Bank.

Job growth continues to defy recession prognosticators expectations. Over 1 million jobs have been added year to date with strong growth in the prime age range (age 25-54). This core group has a higher employment rate today than pre-pandemic and the highest rate since May 2001. Women in that age range are employed at an all-time high. This runs counter to the argument post-Covid that women will remain out of the workforce due to concerns around availability of childcare. 

The stock market (with two strong quarters in a row) and the economy (with robust job growth and positive but fitful GDP growth) has emboldened the most bearish voices to double down on the doom and gloom rhetoric.

Despite all of the headlines discussed above, your financial goals should remain as the most important factor to consider when looking at your investments. If you would like to know more about how we are adapting to the current market conditions, or would like to discuss your individual situation, please reach out your CRBT Wealth Management experts at 319.862.2728.