A few of the most frequently asked questions we are getting from our clients right now are, “How much higher do you think interest rates will go?” and “Is there a chance that interest rate increases could trigger a recession?”
According to Fed Chairman Jerome Powell, interest rates will continue to rise until inflation is controlled. No one knows with any certainty just how long that will take. After its September meeting, the Fed signaled that it expected short-term rates to rise above 4% by the end of this year, continuing to rise in 2023, then falling below 3% in 2024.
There is a chance that higher interest rates, which are intended to slow the economy to a “soft landing,” could overshoot the target and trigger a recession. CNN reported on a KPMG survey of 400 leaders of large companies that found 91% of them expect a recession in the next 12 months. Similarly, the Fed Chairman has warned that general economic pain will not deter him in his quest to conquer inflation.
The financial squeeze on households is a genuine problem already. An October report from the Federal Reserve Bank of Dallas noted that for more than half of American workers, wage gains had been outpaced by inflation. The real, inflation-adjusted value of median wages has fallen by about 8.5%. The report concluded: “While the past 25 years have witnessed episodes that show either a greater incidence or larger magnitude of real wage declines, the current time period is unparalleled in terms of the challenge employed workers face.”
Inflation, interest rates, and a possible recession are all important topics right now. As a trusted financial advisor, it is our job at Legacy to always remain up to date on these issues and provide our audience with the most relevant information possible. For additional articles detailing these issues, visit some of the links below, and for more information on how Legacy’s investment team structures portfolios to mitigate downside risks, capitalize on economic and market trends, and maximize long-term, risk-adjusted performance, visit our website at https://www.lptrust.com/our-services/investment-management/.
- Will Raising Interest Rates Stop Inflation?
- Recession Watch
- How Volcker Tamed Record-Breaking Inflation
If you are a Legacy client and have questions, please do not hesitate to contact your Legacy advisor. If you are not a Legacy client and are interested in learning more about our approach to personalized wealth management, please contact us at 920.967.5020 or firstname.lastname@example.org.
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