Hello Eagle Wealth Community,

We hope you're well.

With markets caught in a volatile pattern of selloffs and rallies, we thought we'd do a quick round-up of what we know (very little) and don't (a whole lot).

(Don't want to hear about markets right now? We've got you. Scroll down to the P.S. for something fascinating.)

We also have a challenge for you at the end, if you're up for it.

Before we begin, we should say: if you're looking for perfect clarity, you won't find it here.  From where we stand, the crystal ball looks murky.
 

Even the economic data strategists rely on is confusing, complex, and contradictory.

How likely is a recession?

We've already seen two negative quarters of GDP growth – that’s the technical definition of a recession.¹

However, the official arbiter of recessions, the National Bureau of Economic Research (NBER), hasn't made the call yet because they're waiting to see how long and how widespread the current dip in growth is.

There are real risks of a recession all around us, but the overall picture is a mixed bag of positive and negative.²

On the positive side: The labor market has defied gravity and is still creating plenty of new jobs. Consumer spending is also looking healthy.

On the negative side: Persistent inflation is obviously on everyone's radar, as are the Fed's aggressive interest rate hikes.

As the economy recovers from all the distortions of pandemic lockdowns, federal spending, supply chain snarls, and policy changes, it could be hard to avoid a recession.

So let's be calm, ready, and flexible.

Are interest rates going to go higher?

That seems likely, yes.

Despite the optimism of folks who hope for a loosening of hikes, the Fed's monetary policy is likely going to continue tightening (and stay tight) to bring down inflation and keep it down.

Slacking interest rates too soon could lead to the lingering inflation problems of the 1970s, which we think Fed policymakers want to avoid.

With the benefit of hindsight, we know that a key contributor to the persistently high inflation in the mid-to-late 70s was the Fed's choice not to aggressively raise interest rates (to avoid triggering a recession).³

Unfortunately, that timid approach ended up failing.

The interest rate shock treatment a new Fed chair imposed in the early 80s triggered multiple painful recessions in the pursuit of low inflation.

It doesn't seem likely that we'll see the same situation today.

Why? The Fed's attitude is quite different, the economy is structurally different, and economists are much more aware of the delicate balance they must strike.

Have we seen the bottom of the market yet?

That's hard to say. Historically, the fourth quarter has been positive for market performance.⁴

However, we all know that the past can't predict the future, and there's a lot of uncertainty on the horizon.

We've got inflation and interest rate worries, midterm elections, a war in Ukraine, and energy price concerns.

However, we've seen that investors are eager to be optimistic, so we can expect rallies when positive news hits.

Timing market tops or bottoms almost never works. What works is being in the market when it moves.

Bottom line: Let's not focus on timing. Let's focus on sticking to the strategies we've set so we can see the upside when it comes.

With all the recent news, we can be forgiven for thinking that things are a mess. That everything’s bad or getting worse.

If you feel that way, you're not alone. A lot of people feel that way.

We're human. We live our lives one day at a time inside a fairly small bubble. And that bubble is easily influenced by daily hassles, headlines, and our own mindset.

We can’t promise you that everything’s going to be great. But we can gently remind you that we’ve been in places like this before. 

And we’ve made it through. 

Maybe a little older, a little wiser, and a little more cautious.

We’re not alone in this. We have you and you have us. We’ll take it one step at a time.

We’re watching, we’re strategizing, and we'll reach out as needed.

Before we go, we’d like to close with a challenge for all of us.

What are you grateful for right now? What’s good and beautiful about your life and the people around you?

Will you hit “reply” and let us know?

Be well,

P.P.S. An update on student loan forgiveness. Please sign up for updates from the Department of Education so you can get your application submitted well before payments resume on December 31st. Processing will likely take weeks, so you want to get in as early as possible to avoid paying more on your loans.

Disclosures and Footnotes

Any companies mentioned are for informational purposes only, and this should not be considered a solicitation for the purchase or sale of their securities. Any investment should be consistent with your objectives, time frame, and risk tolerance.

1 - https://www.foxbusiness.com/economy/us-economy-shrank-second-quarter-entering-technical-recession
2 - https://economics.td.com/us-quarterly-economic-forecast
3 - https://www.schwab.com/learn/story/is-1970s-style-inflation-coming-back
4 - https://www.cnn.com/2022/10/03/investing/premarket-trading-stocks/index.html

Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.

This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.

[ii] http://www.healthcommunities.com/sleep-disorders/overview-of-sleep-disorders.shtml
[iii] https://www.webmd.com/sleep-disorders/guide/insomnia-symptoms-and-causes#2

^{Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.}

^{The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.}

^{The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.}

^{The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.}

^{U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.}

^{International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.}

^{Please consult your financial professional for additional information.}

^{This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.  Copyright 2022 FMG Suite.}