Rising inflation is a bit like a child throwing a temper tantrum in the grocery store.
The red-faced parent, in this case the U.S. Federal Reserve (Fed), tries to calm the child. Sometimes, it works and the child calms down (soft landing). Other times, the child won’t settle, and the parent takes more extreme action, like leaving and coming back for groceries later (recession).
The Fed is laser focused on calming inflation. At a June press conference, Fed Chair Jerome Powell said, “We have both the tools we need and the resolve that it will take to restore price stability on behalf of American families and businesses. The economy and the country have been through a lot over the past two and a half years and have proved resilient. It is essential that we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit all.”
To calm inflation, the Fed has tightened monetary policy aggressively, taking steps that include raising the federal funds target rate by 1.5 percent from March through June of this year. Raising the fed funds rate pushes interest rates higher so borrowing costs go up, and consumer and business spending fall. Lower spending slows economic growth and prices fall.
According to data released last week, the United States economy is slowing but remains quite strong. The data showed:
“…the jobs report, in particular, might not have been as good as it looked. While the establishment number was very strong, the household survey showed a loss of 300,000 jobs, while the unemployment rate remained unchanged at 3.6% only because the workforce shrank. At the same time, average hourly earnings increased by a mere 0.3% in June from May’s level, lower than the rate of inflation.”
Last week, major U.S. stock indices moved higher, according to Barron’s, while Treasury bonds lost value as yields moved higher across the yield curve.
|Data as of 7/8/22||1-Week||Y-T-D||1-Year||3-Year||5-Year||10-Year|
|Standard & Poor's 500 Index||1.9%||-18.2%||-9.8%||9.4%||9.9%||11.2%|
|Dow Jones Global ex-U.S. Index||0.8||-20.1||-20.6||-0.7||0.2||2.7|
|10-year Treasury Note (yield only)||3.1||N/A||1.3||2.0||2.4||1.5|
|Gold (per ounce)||-3.3||-4.5||-3.8||7.5||7.5||0.9|
|Bloomberg Commodity Index||-1.0||16.9||25.2||13.6||7.1||-1.8|
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
THINKING ABOUT RETIRING OUTSIDE THE U.S.? There are lots of amazing places to retire in the United States but retiring elsewhere can be an attractive alternative. Some countries offer incentives to Americans who retire abroad, reported Laura Kiniry of Condé Nast Traveler (CNT).
“Small towns in countries like France, Spain, and Italy, for example, sell off fixer-upper homes for one euro to attract foreign investments; other places are more directly trying to tempt retirees and pensioners looking to relocate, with visas that promise tax cuts, and steep-discount programs that make U.S. dollars go a long way.”
Every year, the International Living Retirement Index identifies “locations where retirees can spend less money, live happily and healthily, and experience a new country without straying too far from all that is familiar,” reported Caitlin Morton of CNT. For 2022, top destinations include Panama, Costa Rica, Mexico, Portugal and Columbia.
If you’re considering retiring overseas, plan carefully. In addition to visiting and researching your retirement destination, make sure you work with experts who understand:
If you retired overseas, where would you settle?
Weekly Focus – Think About It
“Travel isn’t always pretty. It isn’t always comfortable. Sometimes it hurts, it even breaks your heart. But that’s okay. The journey changes you; it should change you. It leaves marks on your memory, on your consciousness, on your heart, and on your body. You take something with you. Hopefully, you leave something good behind.”
—Anthony Bourdain, Chef and author
https://www.barrons.com/articles/services-economy-recession-51657120253?mod=Searchresults&mod=article_inline (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/07-11-22_Barrons_Services%20Growth%20Slows%20Reaches%20Lowest%20Levels%20in%202%20Years_4.pdf)
https://www.barrons.com/articles/stock-market-dow-nasdaq-sp500-51657330112?refsec=the-trader&mod=topics_the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/07-11-22_Barrons_The%20Stock%20Market%20Just%20Had%20a%20Great%20Week%20The%20Next%20One%20Could%20Be%20Messier_5.pdf)
https://www.barrons.com/advisor/articles/retiring-overseas-income-investments-community-conversations-51657222902?mod=hp_ADVISOR (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/07-11-22_Barrons_Retiring%20Overseas%20and%20Income%20Investments_10.pdf)