Is the Fed Done?

Inflation remains the story. We’re watching the Fed write the script and processing the market’s reaction while trying to understand at what point we’ll have a recession and how deep it will be. While the Fed is not likely done raising rates, this week’s .75% hike may be the last large hike. Real estate has started to correct, which should help inflation numbers. Employment is still strong, which concerns inflation hawks and may lead to more moderate rate hikes to slow things down.

The stock market has had good months and bad ones (October was good). We’re in a range bound bear market where stocks have become more attractive by virtue of going on sale. Bonds are yielding a lot more than before, but it also took losses created by rate hikes to get there. It’s a good time to put long-term money to work in a diversified portfolio since we’re in a “bottoming-out process”.

Mortgage rates have jumped, which hasn’t helped first-time buyers take advantage of a softer market. We discuss the technical reasons why mortgage rates are higher (Treasury yields are up and the Fed isn’t buying mortgages anymore), and that a normal interest rate environment would likely lead to mortgages around 6% and we need inflation to moderate before we get there.

Bob Weisse and I explain this and more in the latest investment edition of the Wealthy Behavior podcast. We also looked at why the dollar is so strong, how investors can take advantage, and why international markets are attractive. Be sure to listen to the end as Bob shares some year-end tax loss selling strategies mutual fund investors can use, and I share some resources on things you can do before year-end to improve your finances that have nothing to do with watching the market

Further Reading

Winning the Investment Game

Wealthy Behavior Podcast