Blog

There are a lot of shoes dropping now on the U.S. economy that we have been forecasting in previous newsletters. Inflation is running hot. Economic growth, as measured by GDP, is slowing. Interest rates are climbing. Supply chain bottlenecks still exist. Gas prices remain elevated. Housing demand is cooling. Residential rental rates are climbing. Consumer credit is at an all-time high. Consumer confidence is weakening. You get the point. The list is long.

As expected, it was a very choppy first quarter for the stock market. As we turned the calendar over to 2022, the market gave us that stomach-churning feeling you get when you realize you are at the apex of the rollercoaster climb and now see what’s in front of you. From January 1, it was a swift ride down to a low point in early March before climbing about halfway back up by the end of March.

Happy New Year! It’s only fitting that our quarterly newsletter would be affected by supply chain issues. If you didn’t notice the difference, we can only credit the capabilities of today’s laser printer technology. Unfortunately, ordering official letterhead in late November did not allow for a lengthy enough window to receive a fresh stock by January 1.

What is the U.S. debt ceiling? It’s simply a dollar cap limit that the US Government places on its own authority to raise money by issuing government bonds to continue to meet its obligations like social security payments, tax refunds, interest payments on existing debt, government employee salaries, military salaries, just to name a few. Since 1917, Congress has raised the debt limit 78 times (See Citation 1).

In last quarter’s commentary, we addressed inflation as an increasing headwind on the stock market. Just how much inflation is in the offing and whether it is transitory (i.e. – temporary and manageable) has been the hot public debate in financial circles during the second quarter. Anecdotally, I’ve heard from many of you about the rising cost of 2 x 4’s, tires, used cars, gasoline, and even Burger King chicken sandwiches. I paid $4.09 for an order of large fries at McDonald’s in Moorhead this week! Perhaps the only real takeaway there for me is that by making better diet choices, I could help stave off inflation.

Can stocks and interest rates go up at the same time? Yes, they can, and they often do. Right now, we are in a period of recovery from economic shutdowns across the globe. As companies are forced to raise prices in 2021 and meet a return in consumer demand, we are watching inflation like a hawk. Specifically, we pay very close attention to the 10-year treasury note yield as our sentiment barometer.