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2023—A Time Of Uncertainty Yet Again

By Michael Bischoff, CFP®

In the January 2009 Webb Financial Group newsletter, I wrote an article addressing the last time the US was worried about bank failures. Here is how the article started, “We understand that these are stressful times, with the economy in a recession and markets down dramatically. Workers are worried about job security, and those in retirement are fearful about financial security. Many families have cut back their spending. There haven’t been many positives in the economy in the last six months; however I feel this will improve. Historically, the markets have followed a cycle. I strongly believe the cycle will change and begin to work its way upward.”

What we are seeing now is nothing close to the performance of the 2009 economy despite what is reported by the media. In fact, it’s the mirror opposite. The Federal Reserve is trying to prevent inflation by raising interest rates to slow consumer spending. We are likely already in a minor recession but won’t know until the end of the year. This is where the story is different now. Very few people are worried about job security since the unemployment rate is low and most businesses are hiring because they don’t have enough employees. The 2009 unemployment rate peaked above 10% but currently we’re only in the mid 3%. At present, families are
not cutting back on their spending. In fact, they are spending more than at any time in the past three years. There is no shortage of business at restaurants,
car dealerships or the airport. I can’t believe the price of a vacation for a flight, hotel and car rental, which costs a small fortune and yet no one is staying home. We strongly expect the cycle will begin to work its way upward this year.

In March, we saw a volatile ride for both the stock and bond markets as the news of the Silicon Valley Bank failure was digested, the subsequent response by the government and concerns regarding several other banks. To support businesses and households, the Federal Reserve Board announced it will make additional funding available to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors. This action will

bolster the capacity for the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy. Here is an example of information from a local bank sent to address current concerns:

  • We are well capitalized

  • We have a large amount of liquidity

  • We are very profitable

  • Our business model is 100% opposite

     of the SVB and crypto bank model

Investors are now questioning what this means for their portfolios. Recently, the Federal Reserve revealed a cautious but steadfast move with an additional 25 basis points rate hike but gave guidance signaling forthcoming conditions. They also said the banking industry is strong and resilient but needs stronger regulations and more supervision. On the inflation side, goods inflation is coming down with wage inflation also showing signs of slowing. They look to lower interest rates later this year and into 2024 which will help the housing and manufacturing markets.

By no means are we looking at clear skies yet, but after a tumultuous March, calmer waters could provide support for balanced portfolios in the remainder of the year. Most financial markets are positive with the S&P 500 up 7.36% as of the end of March. Don’t worry, live your life, travel, go out with family and friends, do the things you love and enjoy yourself.

“Uncertainty is the only certainty there is!” by John Paulos


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