Market Update & Perspective Podcast

June 9, 2022

As you know, the economy is being buffeted this year by unprecedented geopolitical events all hitting at the same time – a “Perfect Storm” so to speak. While I am confident that things will ultimately turn around, we need to avoid mistakes like selling “good” investments in down markets, as well as avoiding the opposite end of the temptation to “buy the dip” at this time … as the “dip” may not be over yet.  So, I prefer to see how things “shake out” on inflation and higher interest rates, as well as the ultimate effect the other Federal Reserve policy of reducing the monthly dollar amount of home mortgages they are willing to support. 

Transcript

Frank Deptola & Associates - Market Update June 9, 2022As you know, the economy is being buffeted this year by unprecedented geopolitical events all hitting at the same time – a “Perfect Storm” so to speak. While I am confident that things will ultimately turn around, we need to avoid mistakes like selling “good” investments in down markets, as well as avoiding the opposite end of the temptation to “buy the dip” at this time … as the “dip” may not be over yet. So, I prefer to see how things “shake out” on inflation and higher interest rates, as well as the ultimate effect the other Federal Reserve policy of reducing the monthly dollar amount of home mortgages they are willing to support. For example, earlier today the rate of interest on 30-year fixed rate mortgages increased from 5.09% last week to 5.23% (CBS News). The Mortgage Bankers Association reported this morning that mortgage applications decreased 6.9% over one week earlier, and that “the group’s composite index, a measurement of mortgage loan application volume, is at its lowest level in 22 years. Its refinance index is 75% lower than a year ago.” As you know, the housing market is a very important part of the US economy. This morning I listened to a press conference from the European Central Bank, held in Amsterdam. Christine Lagarde, ECB’s President, announced their plans to increase interest rates for the first time in more than a decade, to tackle persistent inflation, by a quarter of a percentage point in its July meeting – from currently a “minus 0.25%” -- and increase it again in September. The WSJ commented shortly thereafter, “unlike the Fed, the ECB needs to worry as it raises rates about how higher borrowing costs will pressure fragile and highly indebted southern European economies like Italy and Spain, whose sovereign debt sold off after the ECB’s rates decision.”The comments in my 2019 article on “Chicken Little and Today’s Marketplace” (under Library & Resources tab on www.deptola.com) and those made in my three podcasts in late February and March (under our Company Blog) still appear to be as applicable as ever, and objectively accurate, on the need for us to “buckle up” for what I expect to be a volatile “market” ride this year.I hope this message is helpful in explaining how “I see things” unfolding over the balance of this year. Bear in mind, that the “market” can turn suddenly, and unexpectedly, in the exact opposite direction as well.Until the market’s “Perfect Storm” settles down, we are keeping a “steady hand on the wheel” and an open “watchful” eye. Be assured that we are trying to “do our best” to navigate our course in prudently managing our clients’ portfolios through these “heavy and changing seas.” For over ten years, “Taking Care of Their Financial Well Being” has been our primary focus.Best regards,Frank