Newsletter: Markets are Primed for a Pullback

Evidence suggests that this year’s risk asset rally is likely primed for a pullback.

So now, why now?

Why the glum news after the S&P 500 index posted one of its strongest year-to-date gains in a while?

Well, it’s essential to remember that most market activity is underpinned by a narrative or a story that influences price swings either higher or lower.

And this year’s rally isn’t any different.

To be sure, the consensus view among many investors this year was that the Federal Reserve (the Fed) would finally beat inflation by aggressively raising interest rates.

And, while higher rates are typically a market headwind, investors bet that the Fed’s aggressive moves would eventually tip the economy into a recession, prompting policymakers to reverse course sooner rather than later.

Now, the Fed tends to cut rates to get ahead of rising unemployment, which tends to happen during a recession, and so financial markets interpret falling interest rates as supportive of market prices.

And so, while headline inflation has fallen this year, the long forecasted recession has failed to materialize.

Now, in any other situation, this would be a win for households, businesses, and policymakers alike.

But the fact that the US economy continues to hum along even as it’s now more expensive than ever to borrow money suggests that the fight against inflation isn’t over yet, and the story many investors have been betting on this year likely won’t happen as quickly as once hoped.

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August Financial Independence Topics

This month, we’re diving deep into three main topics:

  • Evaluate whether a trust makes sense for you
  • Tax shelters, tax-free financial products and asset transfers
  • Ways to calculate your life insurance need

Log in to the FI|Mastery Journey and get started on essential tasks to get your financial house in order!

The Big Questions

If you do nothing else this week, consider the following Big Questions to help keep your financial house in order:

Question 1

Month-end Review: Evaluate Your Need for a Trust

What steps can you take this week to expand your understanding of trust-based planning and how it could potentially benefit you and your loved ones?

Take the time to deepen your understanding of trust-based planning. Learn about the different types of trusts available and how they can address your specific concerns. There are revocable living trusts, irrevocable trusts, special needs trusts, and more. Knowledge is power, and the more you know, the better equipped you’ll be to make informed decisions for your future and that of your loved ones.

Question 2

Month-end Review: Know Which Risks to Avoid

What steps can you take this week to assess the risk level in your current investment portfolio? Do you hold any assets that could be considered high-risk and how do these align with your financial goals?

Take a moment to re-evaluate your investment portfolio. Have you been lured by the potentially high returns of speculative stocks or cryptocurrencies? Remember, the thrill of potential gains can quickly turn to despair with the inherent volatility of these assets. While they might promise substantial returns, the risk associated with them can outweigh the potential benefits.

Question 3

Month-end Review: Preparing for Tax-Free Income

Have you started investing in tax-free accounts like Roth IRA, 529 Plan, or an HSA? If not, what’s stopping you and what steps can you take this week to begin?

Don’t wait for the “right” time to start investing. The best time to begin is now. Consider the money you can put into a Roth IRA, a 529 Plan, or an HSA. Remember, these accounts are more than just a tax-saving instrument; they are an integral part of your holistic financial plan leading you to financial independence.

Financial Planning Articles

  • Rekindling the Eye of the Tiger – Escaping Mediocrity
  • 10 Ways Minimalism Will Help You Be Less Busy
  • Make a Choice and then Let it Go
  • There’s No Secret to How Wealthy People Dress
  • Following My Heart Instead of the Money

Read more here >>>

Analyst Corner

  • Complacency Concerns
  • I Don’t Think the Fed is Done with Rate Hikes
  • Labor Market Pulse – Signs of Softening
  • US Government Debt – Paying the Piper
  • Valuations, Economy May Favor Value Stocks

Read more here >>>