The Federal Reserve Raises Rates Despite Banking Problems – Prior to the Silicon Bank and Signature Bank failures, the Federal Reserve was largely seen as debating either a 25 or a 50-basis point rate increase, as inflation was still running about double the Fed’s target. The calculus changed when stress in the banking system emerged, with market expectations shifting down to either a 25-basis point increase or an outright pause. The Federal Reserve appeared to thread the needle last week with its announcement of a 25 basis point increase, while also offering a clear acknowledgement that banking turmoil could tighten financial conditions and impact lending going forward—which might serve as a disinflationary force. In that sense, tighter financial conditions could arguably serve as a substitute for higher rates in terms of slowing economic activity, which means the Federal Reserve may only need to raise rates one more time – if that – to accomplish its goal. The Fed released new projections for the benchmark fed-funds rate to settle at 5.1% by year-end, up only slightly from its current 4.75% to 5% level. As ever, however, the Federal Reserve Chairman sought to temper market expectations for the end of monetary policy tightening, in stating: “Events in the banking system over the past two weeks are likely to result in tighter credit conditions for households and businesses, which would in turn affect economic outcomes. It is too soon to determine the extent of these effects, and therefore too soon to tell how monetary policy should respond.”1
7 Secrets of Building an Effective Retirement Portfolio in a Volatile Market
In a volatile market, like the current one, creating the ultimate retirement portfolio is not an easy task.
To build a portfolio that can potentially reach your goals, you must put time and effort into defining your investing objectives, determining your asset allocation, and managing your investments over time.
To help you understand how to do this in a volatile market, check out our free guide. You’ll learn the secrets of successful retirement portfolios, including the right way to set your goals and retirement needs, as well as the key basics of disciplined investing, based on our decades of experience.
If you have $500,000+ to invest, get our free 7 Secrets to Building the Ultimate DIY Retirement Portfolio2 guide today.
The Next Banking Shoe to Drop was in Europe – Early this week, regulators in Switzerland helped arrange a $3 billion purchase of Credit Suisse by UBS, in one of the largest banking deals in years. Credit Suisse was a 169-year-old banking institution with 50,000 employees, so its collapse had many investors worried that the banking crisis was spinning into global financial turmoil. But a closer analysis reveals that problems with the Swiss lender had been evident for months if not years, and one might even argue that Credit Suisse’s demise was likely even before any problems emerged at Silicon Valley Bank (SVB) and Signature Bank (SBNY). Unstable management, investment banking losses, and a string of bad bets hobbled the Swiss lender, including but not limited to its partnership with now-bankrupt Greensill Capital and its $5 billion loss from the collapse of Archegos Capital Management. Last October, rumors of the banks’ problems on social media led to a major outflow of wealthy clients, with deposits falling more than 40% and assets plummeted by 30% in 2022. In our view, failure here was tied more to failures in risk management than systemic problems in the banking sector, the same read we have on SVB and SBNY.3
For the First Time in Over a Decade, Home Prices Fall Year-over-Year – As mortgage rates doubled over the past year, sales of existing homes endured a streak of month-over-month declines. That streak ended in February, with sales of existing homes rising 14.5% from January, though year-over-year were still down -22.6%. The snapping of month-over-month home sale declines may have been driven by a slight improvement in home affordability, with home prices falling -0.2% year-over-year in February, the first annual decline since 2012. The housing market may be the most demonstrable sector of the economy feeling the impact of the Federal Reserve’s monetary tightening campaign, as housing is highly interest rate sensitive.
Building a Retirement Plan That Can Withstand Any Market – Do you know that there are additional steps you can take to help build an ultimate retirement portfolio that meets your financial goals? Especially during this time of extreme volatility and recession fears, I recommend reading our guide, 7 Secrets to Building the Ultimate DIY Retirement Portfolio.5 This guide will show you how to create a retirement investment plan that can withstand any market—and potentially help you achieve your goals.
If you have $500,000 or more to invest, get this guide to learn our ideas on the step-by-step process of building and maintaining a retirement portfolio that will potentially help you reach your goals and enjoy a secure retirement.
Disclosure