Ingrams July 2023

Whither the Recession? While most economists and wealth managers are approaching the metrics with caution, saying a recession is still possible, the markets in recent months have acted as though a downturn isn’t an immediate concern.

down 10 percent, and even cash was getting less than 2 percent. In short, says Mariner Wealth Advisors’ Justin Richter, “there was nowhere to hide” for investors. Now, he says, it’s not unreasonable to ask whether the Fed has indeed found a comparatively painless way out of the inflation cycle. But he cautions that sentiment may be growing too opti mistic in the near term. Indeed, says Scott Boswell, pres- ident of Commerce Trust’s west div- ision, “uncertainty remains. Having rebounded from 2022’s lackluster performance, the capital markets are in positive territory for the year. … The Federal Reserve’s rate-hiking strategy to break inflation appears to be working, but inflation remains well above the Fed’s 2 percent target range. The robust labor market has buoyed the U.S. economy, which is showing signs of slowing.” Still, Boswell says, the lingering possibility of recession casts a for midable shadow over the investment landscape. The Inflation Impact Investors long aggrieved by near- zero interest rates on the safest in struments have reached a point where they can actually see positive returns, even after accounting for inflation. The latest consumer price index for June showed the first year-over-year inflation rate of less than 5 percent since February 2022—and even some banks have special offers now that ex ceed that level. But does a difference of a few points really move the needle on in vestor behavior? “Interest rates absolutely matter for asset allocation decisions—higher in- terest rates create competition for investor capital,” said Richter. “Par ticularly for retirees or near-retirees to allocate more heavily to cash/fixed income with yields north of 5 per cent.” The question for investors, then, is how much risk someone is willing to take to earn modestly more, he said. “Having a higher-rate environ ment for longer causes greater dispar ities between asset classes and within

The Dow Jones Industrial Average is up 17% since October

Gold Began a Strong Recovery in Late 2022

War in Ukraine Spiked Oil Prices, Then Came a Steady Decline

equity sectors. Investors need to be more aware of the interest-rate sensi tivity of their investments as the cost of capital remains high. For short-term savers, said Kieffer, the higher rates are a welcome relief from 15 years of near-zero returns.

“Overnight rates (money markets, etc.) have moved above the infla tion rate, enabling investors to get a real rate of return without taking on much, if any, risk,” he said. Typical investors can get CDs, and Treasury notes well above 4 percent for the

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Kansas City’s Business Media

July 2023