With all 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:
Inflation Just Keeps Going Up – Another month, another record-setting inflation print. In March, inflation continued on its upward trajectory, surging 8.5% year-over-year and ‘fueled’ by rising energy and food costs. The war in Ukraine and associated disruption to Russia’s contribution to oil and gas markets is largely responsible for pushing energy prices higher, as global demand stays steady in the face of tight supply. Energy prices rose a stout 11% in March from February. Food prices posted more modest gains, rising 1.5%, but price pressure could continue given Ukraine’s outsized production of wheat, sunflower oil, and other goods. Russia is also a major food producer. The news media focused on the headline number, 8.5%, calling attention to the fact that the consumer-price-index rose at its fastest annual pace since 1981. But a closer look at the inflation numbers offers some encouraging news – core inflation, which excludes food and energy prices, rose just 0.3% month-over-month, a sharp reduction from the previous month’s growth rates. What’s more, while rising energy prices are damaging to consumer sentiment, they do not necessarily have an outsized impact on overall consumer finances. U.S. consumers spend less than 5% of their total household budget on energy, on average.1
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Are Your Investments Protected if the Economy Enters a Recession?
Market turbulence and uncertainty are scary—and even though investors are worried that the economy will enter a recession, now is the time to take action and prepare yourself for the coming months.
When preparing for a potential recession, it’s important to understand the following –
Get the answers to these questions and more with our free guide, A Recession is Coming: 6 Insights to Know You’re Prepared2
If you have $500,000 or more to invest, get our free guide today. You’ll learn the scope and impact of recessions, and get our viewpoint on the most important moves you can make to weather a potential one. Don’t wait—get this guide today!
Download Your Copy Today: A Recession is Coming: 6 Insights to Know You’re Prepared2
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Corporate Profit Margins Have Surged, and Could Keep Growing – While all the focus remains on rising inflation, the war, and concerns over the pace of Federal Reserve monetary policy tightening, corporate profits have quietly set new records. Over the last 12 months, S&P 500 companies have reported a collective net profit margin of 12.18%, which is significantly higher than historical profit margins. In fact, there have only been three years since 1999 when corporate profit margins reached double-digits – 2006, 2018, and 2019. And even in those three years, corporate profit margins never even reached 11%. The figures for 2021 shattered those records and also represent the highest after-tax corporate profits relative to GDP that have ever been recorded (records date back to the 1940s). One might expect that corporate profit margins have peaked particularly in this more challenging economic environment, but signs indicate there may be more room to run – S&P 500 companies are expected to generate net profit margins approaching 13% in 2022, as companies raise prices slightly and focus on investment that increases productivity. This strong profit outlook has led analysts and companies to raise corporate earnings expectations for the fiscal year 2022, even though earnings estimates have come down for Q1.3
A Growing Number of Investors and Economists Predicting Recession – Recession forecasts are starting to appear more and more in the news. Just last week, economists surveyed by The Wall Street Journal were increasingly signaling the belief that the U.S. economy would enter a recession in the next 12 months. The number of respondents saying they saw recession was 28%, which was up sharply from 18% in January. Bank of America ran a similar survey and found that stagflation expectations were at their highest since August 2008, which it should be noted was already several months into the “Great Recession.” In our view, these indicators of souring sentiment may be a positive for markets. The result of falling expectations is that the U.S. economy now has a lower hurdle to clear in order to deliver an upside surprise, which markets tend to like.4
Is a Potential Recession Around the Corner? Let Us Help You Navigate Through It!
Many investors are concerned about how to invest during a potential recession. Especially if you’re at or near retirement, a recession may require pivoting your retirement investing strategy.
In order to do this, it’s important to understand how recessions work, how long they last, and how to potentially protect yourself and your family from long-term damage to your assets and security. We can help you with our free guide, A Recession is Coming: 6 Insights to Know You’re Prepared5.
If you have $500,000 or more to invest, get our free guide today. You’ll learn the scope and impact of recessions, and get our viewpoint on the most important moves you can make to weather a potential one. Don’t wait—get this guide today!
Disclosure