Hello, We had the opportunity to travel down to the Bahamas last week for a work conference that we made into a vacation also. I have to tell you about a miracle that happened too. We successfully flew with our 5.5-year-old and 15-month-old daughters! That was an accomplishment in and of itself and we got to help several people on the planes exercise their patience virtue. A win-win, right? In all actuality Amelia did great! In fact, she was fairly indifferent to flying, and Ansley did as well as someone her size should do. The pictures below are from our trip.

The place we stayed had a waterpark which Amelia loved. One of the pools was a wave pool. Imagine ocean waves in a pool with a concrete floor. No sand and dirty feet when you get out. Amelia mostly wanted to sit in about a foot of water and play in the wave pool. I asked her several times if she wanted to go in deeper or go to a different pool or the splash pad and her consistent response was, “No, I’m having a good time right here.” She liked keeping it simple.

KKR, which is an investment company with a wide array of asset classes, recently released its “Mid-Year Global Macro Outlook” report. Henry McVey is the Chief Investment Officer of KKR and in the report he advocates for “still keeping it simple” with their investments, staying the course, and avoiding short-term investments because they’re likely to underperform. We have to couple this with the reality that investing now is important because things may slow down at the end of the Federal Reserve’s monetary tightening process. From a New York Times article last week, “In late 1989, an economic commentary newsletter from the Federal Reserve Bank of Cleveland asked the question that was on everyone’s mind after a series of Federal Reserve rate increases: “How Soft a Landing?” Analysts were pretty sure growth was going to cool gently and without a painful downturn—the question was how gently.”

In late 2000 the same question was asked and again in late 2007. If you remember, major issues ensued after those questions. From the Times article, “But it can be difficult to tell in real time whether the economy is smoothly decelerating or whether it is creeping toward the edge of a cliff—one reason that officials like Mr. Powell are being careful not to declare victory.” Last week the government raised interest rates to 5.25% to 5.5% which is the highest level in 22 years. Remember starting 2022 rates were near zero. From the article, “Those rate moves are trickling through the economy, making it more expensive to buy cars and houses on borrowed money and making it pricier for businesses to take out loans.”

It’s been discussed on Twitter that, “During the tightening cycle (what is happening now with rates going up), the economy typically expands at its fastest pace, as it feeds off the lagged effects of the prior period of policy accommodation. It slows down precipitously in the two years that follow the end of the Fed tightening cycle.” It’s kind of like if we did not eat for a day or two, we’d probably still be able to do our daily activities. We may not like the way we feel, like we don’t like that we are paying more for eggs right now. If we continued to not eat, we’d see the impact just as the economy may see it later down the road. Fun fact, the New York Times article traced the origins of the adage “soft landing” back to the early 1970s right after America had first landed on the moon. The feat of landing on the moon had been difficult but the spaceship softly landed. By the 1980s it was widely used as a way to express hope and optimism for the economy. What we’ve discussed today is another case against leaving our funds uninvested in cash equivalents. When we do we miss opportunities like we are having in the market this year. If we had sold last year when the market was down and stayed in cash, we would have missed this year’s upward velocity and it would have been difficult to make up those losses.   Until next week, David C. Treece, Financial Planner 864.641.7955

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Clients Excel, LLC is an independent financial services firm that utilizes a variety of investment and insurance products. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Clients Excel, LLC are not affiliated companies. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified tax professional for guidance before making any purchasing decisions. Clients Excel, LLC is not affiliated with or endorsed by the U.S. Government or any governmental agency. Clients Excel, LLC has a strategic partnership with tax professionals and attorneys who can provide tax and/or legal advice. 05.10.2023