Steady as She Goes

The markets have been on a roll for the past 5 months. It hasn’t just been the U.S. markets, either. The European and Japanese markets are both in record territory. While the recent action has been great for everyone’s accounts, we believe that the likelihood of a correction is substantial but not predictable. Therefore we are currently conservatively positioned, awaiting opportunity. While we wait, your cash held at Fidelity is currently earning interest at a 5% annual rate.

The U.S. economy is in good shape. U.S Gross Domestic Product rose at an annual rate of 3.4% in the fourth quarter and is currently tracking for a positive 2.8% for the first quarter of 2024. The definition of a recession is for the economy to contract for two successive quarters. At this point, the coast is clear.

Unemployment in the United States continues to impress at 3.9%. Anything less than 5% is considered ideal since it allows workers to negotiate a fair wage. In fact, the current average wage growth in the United States of 5% exceeds inflation, helping the American worker “catch up” to current prices. Speaking of inflation, now that it has dropped from an annualized rate of 7.1% in June of 2022 to only 2.5% today, it can be argued that the Federal Reserve has met its goal of restoring price stability. Keep in mind that lower inflation does not mean that prices are going down; it just means that prices aren’t rising as quickly. It will continue to take time to get used to current costs, but deflation (when prices drop) is much worse for the economy than moderate inflation (which is what we have now).

While we understand that no one wants to pay more for things, prices are expected to stay/continue to slowly rise. If you are concerned about current prices or want to discuss your spending, please reach out to us so that we can understand your concerns. It is only through a thoughtful analysis and discussion of your financial situation that we can help.

In the Hard to Believe Department, if you were born in 1951, you will attain the age of 73 this year. Where did the time go? You are now required to start taking minimum required distributions from your IRA. Your patient Uncle Sam is now ready to share actively in your partnership with him since your account has grown tax-deferred for many decades. Please call us to review what that entails.

Very Truly Yours,

Michael F Cantlon
Thomas E Guyett
Robert Gephart