Private Client Group

August 1st, 2022

Fed Raises Rates, Europe Natural Gas Threat, Chip Industry Moves

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Recession talks continue to saturate the media as investors’ worries grow. In today’s Steady Investor, we dive into key factors that we believe are impacting this situation and the future state of the market, such as:

Federal Reserve Raises Rates by 75 Basis Points, and Stocks Rally – As very widely expected, the Federal Reserve raised the benchmark fed funds rate by 75 basis points at this week’s FOMC meeting. The Federal Reserve has taken a decisive tilt in the hawkish direction, with a stated goal to cool demand in the economy in an effort to tamp down inflation. In this week’s meeting, Federal Reserve Chairman Jerome Powell acknowledged that the US economy was slowing, particularly as consumers face off with higher food and energy prices. Chairman Powell also noted, however, that he does not see the US economy in recession, but he does potentially see enough moderation to perhaps warrant a slower pace of rate increases at future meetings. It was these comments signaling the possibility of smaller rate increases in the future that arguably sent stocks rallying, with the S&P 500 finishing up over +2% on the day of the announcement. There are some early signs that the inflation picture in the US may ease in the second half of the year, as gas prices have fallen over 10% since mid-June and other raw materials and commodities prices have eased from summer highs. The housing market has also, for the first time in years, shown consistent signs of slowing down, with the Commerce Department reporting that new home sales in June fell to their lowest level since the early days of the pandemic. If economic data continues to soften between now and the Fed’s September meeting, it seems likely that a 50-basis point hike or lower could be in the offing.1

Here Are 4 Effective Ways to Protect Your Retirement from Rising Inflation!

As inflation rises, the one group that it’s affecting heavily is retirees. Rising inflation can be very costly for the economy, but there are steps you can take to keep your investments afloat.

Instead of panicking when emotions are high, take a look at steps that could help reduce the sting of inflation. To help, we’re offering our exclusive guide that will give insight on:

If you have $500,000 or more to invest, get our free guide, 4 Ways to Protect Your Retirement from Rising Inflation2 today!

European Countries Brace for Natural Gas Shortages – European countries are preparing for a long fall and winter, as the fate of natural gas flows from Russia hangs in the balance. Russia once accounted for 40% of Europe’s natural gas supply, transported through the 760-mile-long Nord Stream pipeline that connects Germany with Russia’s Siberian gas fields. The war has thrown the volume and consistency of these gas flows into question. Over the past couple of weeks, Nord Stream was shut down due to routine maintenance, but once it came back online Russia had reduced the amount of gas flowing to 20% of capacity. Russia claims that sanctions-related issues are preventing it from operating the pipeline at full capacity, but the more likely rationale for curbed supply is Russia exerting leverage over Europe in retaliation for western sanctions. Europe is now scrambling to plan for several months or a year-plus stretch with reduced natural gas supplies, and EU countries recently agreed to reduce their gas usage by 15% from August onward. This decision will come with many trade-offs between industry and household use and could weigh on Europe’s economy in the second half.3

A Huge Week for Semiconductor Manufacturers – China is currently the world’s leader in building new semiconductor manufacturing facilities, known as fabs. According to the chip-industry group SEMI, China is planning to build 31 new factories by 2024, as it angles to become a global supplier of the basic but common chips currently in short supply. By comparison, Taiwan is building 19 factories over the same period, and the US has 12 planned. But news from the Beltway this week could shift the calculus – a bipartisan bill with $280 billion slated for the semiconductor industry passed the Senate this week, known as the CHIPS and Science Act of 2022. The bill would spend $52.7 billion in financial assistance (loans, subsidies) for the construction and expansion of fabs in the US, as well as doling out $24 billion in tax incentives and other programs. The bill also has significant carve-outs for semiconductor research and workforce training, which could give the US semiconductor sector a push to become more competitive with Taiwan and China – where state subsidies are the norm.4

Don’t Let Inflation Destroy Your Long-Term Investments – If you are an investor, especially one nearing retirement, don’t panic over inflation! As stressful as it can be, there are 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 Inflation5. You will get insight on:

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

Disclosure

1 Wall Street Journal. July 27, 2022. https://www.wsj.com/articles/how-the-fed-could-lose-its-nerve-11658954886

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. July 25, 2022. https://www.wsj.com/articles/nord-stream-inside-the-closure-of-europes-key-russian-natural-gas-pipeline-11658233177?mod=djemRTE_h

4 Wall Street Journal. July 27, 2022. https://www.wsj.com/articles/senate-approves-280-billion-bill-to-boost-u-s-science-chip-production-11658942295?mod=hp_lead_pos3

5 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.


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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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