Private Client Group

November 7th, 2022

Fed Hikes Rates Again, Labor Market Adds Inflation Pressure, Heating Bill Relief

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With the recent news and headlines surrounding the current state of the market, we are taking a deeper dive into key factors that we believe investors should keep an eye on, such as:

As Expected, the Federal Reserve Raises Rates Again – The Federal Reserve announced another 75-basis point increase to the fed funds rate last week, in a move widely expected by markets. The move placed the benchmark fed funds rate at a range between 3.75% and 4%. Investors were hoping for signs the Fed was making plans to slow or even pause rate hikes in the not-too-distant future, but that is not necessarily the news Fed Chairman Jerome Powell delivered. While the Fed did not release updated projections for the projected path of rates, Chairman Powell did suggest that future rate hikes could be smaller but that the Fed will likely need to stay in the tightening cycle for longer. In Powell’s own words, “the question of when to moderate the pace of increases is now much less important than the question of how high to raise rates and how long to keep monetary policy restrictive.” In layman’s terms, what Powell is saying is that the Fed may implement smaller rate hikes in the future, but that the market should expect the terminal rate – which is where fed funds will eventually peak in this tightening cycle – to be higher. Markets reacted adversely to Powell’s comments, marking yet another instance where the market’s expectations for peak interest rates were presumably too low.1

Are You Keeping Your Investments Protected from Inflation?

As inflation rate hikes continue, one group that it’s affecting heavily is retirees. And as costly as inflation can be for the economy, there are ways you can still keep your investments afloat during turbulent times.

To help you, we’re offering our exclusive guide, 4 Ways to Protect Your Retirement from Rising Inflation2. Instead of panicking when emotions are high, this guide will help you take a look at steps that could help reduce the sting of inflation. You will get insight on:

If you have $500,000 or more to invest, get our free guide today!

Download our free guide, 4 Ways to Protect Your Retirement from Rising Inflation2

A Tight Labor Market Keeps Pressure on Inflation and the Fed – Strength in the U.S. jobs market is a problem for the Fed because tight labor conditions place upward pressure on wages – which is itself inflationary. The “data-dependent” Fed is focused on year-over-year and month-over-more core inflation readings (of course), but it is also highly sensitive to ongoing strength in the labor market because it means inflation pressures could persist. The September jobs report didn’t help. The Labor Department reported that demand for workers continues to far outstrip the number of unemployed Americans seeking a job. Total job openings climbed from 10.3 million in August to 10.7 million in September, which is slightly more than double the number of unemployed Americans seeking work (5.8 million). To be fair, however, the number of job openings has been in steady decline since its March 2022 peak of 11.9 million, so notwithstanding September’s slight increase, the economy has been slow-stepping in the right direction for the Fed. If the Fed is looking for meaningful signs that inflation is falling, the jobs market is loosening, and U.S. consumers are starting to pull back, it has not received them to date.3

Households Continue to Hang On – Americans boosted savings in the wake of the Covid-19 pandemic, as stimulus checks and reduced spending on travel and tourism bolstered bank account balances. At its peak in the middle of 2021, household savings topped $2 trillion, up from barely $100 billion in the first quarter of 2020 (before the pandemic). Households have since tapped into these excess savings, but the cushion is still meaningfully large. According to estimates from Fed economists, Americans still have about $1.7 trillion in stashed savings, though the figure has been trending downward as inflation eats into budgets.4

Federal Reserve4

Americans May See Some Relief in Heating Bills this Winter – There may be some good news coming to households this winter, in the form of lower-than-expected heating bills. The war in Ukraine and subsequent volatility in commodity markets led to many dire projections about access to oil and natural gas this winter, but it appears the worst of those fears can be put to rest. Natural gas prices have declined by nearly half since late August, as a warmer-than-usual autumn and strong domestic production have refilled storage facilities and boosted supply. Lower natural gas prices could ease winter heating bills for consumers while also lowering costs of production at manufacturers.5

Don’t Let Inflation Destroy Your Retirement Assets – Are you worried about inflation and its impact on your investments? Don’t panic! As inflation persists, there are still steps you can take to prevent it from affecting your long-term investments.

To help, we’re offering our exclusive guide, 4 Ways to Protect Your Retirement from Rising Inflation6. You will get insight on:

If you have $500,000 or more to invest, get our free guide today!

Disclosure

1 Wall Street Journal. November 2, 2022. https://www.wsj.com/articles/jerome-powell-to-markets-the-destination-matters-not-the-journey-11667427735?mod=djemRTE_h

2 Zacks Investment Management reserves the right to amend the terms or rescind the free 4 Ways to Protect Your Retirement from Rising Inflation offer at any time and for any reason at its discretion.

3 Wall Street Journal. November 1, 2022. https://www.wsj.com/articles/job-openings-hiring-economy-september-2022-11667249735?mod=djemRTE_h

4 Federal Reserve. October 21, 2022. https://www.federalreserve.gov/econres/notes/feds-notes/excess-savings-during-the-covid-19-pandemic-20221021.html

5 October 30, 2022. https://www.wsj.com/articles/natural-gas-prices-have-plunged-into-autumn-11667084564?mod=djemRTE_h

6 Zacks Investment Management reserves the right to amend the terms or rescind the free 4 Ways to Protect Your Retirement from Rising Inflation offer at any time and for any reason at its discretion.


DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

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