May the 4th
Happy May the fourth!
For years I have said that the FED is the most powerful Force in the Universe. Ok, not the Universe.
They are more powerful at moving our economy positively and negatively.
Just look at 2022, as an easy example. The FED wanted to slow down the economy to lower inflation.
They seem to be doing a pretty good job at that, for better or worse.
Their dual mandate of full employment, and targeting inflation around 2% seems to be a tall order.
The FED Fund rate is now 5%-5.25%, which is the highest in 16 years.
The pandemic shifted the job market. Many retired early. There was an increase in new small businesses(think etsy and tik tok).
We still have just under 2 jobs for every seeker. This has caused wage inflation.
We have underbuilt housing for the past decade. This has caused severe rent inflation.
The bottom line.
The FED cannot control everything by raising rates. Global logistics and supply issues come to mind.
Their goal was to slow the economy to get high inflation under control. It has come down from 9% last year and heading toward 4%!
GDP is now expected to be flat for 2023, and there is rising concern of a recession.
I would much rather pay extra for eggs, than have a recession and see a million Americans lose their jobs.
Be careful what you ask for! When interest rates and borrowing costs go up, bad things happen!
Keep an eye on the issues of smaller banks this year… more challenges ahead!
May the 4th Be With You!
The foregoing information has been obtained from source considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Michael Rodenbaugh and not necessarily those of Raymond James.