Well, it has been quite some time since I was last active on the site, and with a new year, I want to say, “Happy New Year and Welcome Back.” I bring renewed hope to keep up and keep you informed. A lot has happened since my voluntary blackout, so to speak, but I was able to change jobs early last spring and having gotten somewhat up to speed there, I will be able to dedicate my time again to the financial planning aspect of how my time is spent. That is not to say that for this period, away from the blog and newsletters. I was not involved in personal finance I was indeed but just not in the best position to contribute positively the way you deserve. With that said, let us jump into the new year and what it will hopefully bring to each of us as it relates to personal finance.
Over the previous months, I have observed the economy, the remnants of the pandemic, the markets, housing, and inflation’s effects on interest rates, both paid and charged by various entities. Regarding the economy, I am just as lost as many of you. By the traditional metric of two-quarters of a shrinking GDP, we hit that at the end of September. But from what I have seen and read, the fourth quarter will likely see some growth despite all of the corresponding madness. But as for any official word that will follow later in the first quarter of 2023.
Generally, when we have a downturn like we have experienced this past year, we expect inflation to rise. At different rates than we saw in 2022, an increase over the expected 3% would not have been uncalled for. Yes, prices for many items we need for everyday survival say massive increases in 2022, but were the entirety of the increases due to inflation? On that, I am not as certain as many others may seem to be due to, yes, inflation did cause prices to skyrocket. Still, at the same time, many businesses in various industries also reported record earnings meaning the higher prices we all saw and experienced may not have been solely due to inflation.
But to understand how we have arrived here, you need to go back to March 2020 and the start of the COVID pandemic. Yes, at that time, the US and the world shut down simultaneously, causing a ripple effect that is still being felt and, in some ways, understood. This massive and never before seen level of things ceasing to exist or be done, as we have all experienced previously, caused a lack of goods and services that, to a degree, are still being felt. Yes, for the most part, the world is back to business as usual; however, China just recently ended its “zero” COVID policies. And we now need to look at the great retirement that occurred due to the pandemic, with millions of people electing to leave the workforce and retire early or seek a change in careers. And if these things were not enough, you must consider what a lack of production in China has done to the world’s supply chain regarding manufactured goods. And for a time, the US was lacking in these goods and was also experiencing a bottleneck issue due to a lack of dock workers to unload imports and then a lack of truck drivers to distribute the goods across the country. Some of these issues have been resolved, and I am sure that at some point, in some manner, they will rise to the surface again and cause issues for consumers and the economy as a whole. Despite the immediate skyrocketing of unemployment at the beginning of the pandemic, we have rarely seen job creation. We are sitting at near historic low levels of unemployment in the US. When my wife and I go anywhere in Nashville, we see help-wanted signs just about everywhere we go, and at times we have trouble eating out due to staffing shortages at restaurants.
And until the Fed began raising the interest rates, the housing market was nearly going up throughout the country. But as it is designed to do when fighting inflation by raising interest rates, the housing markets have cooled. Not due to a lack of interest by people wanting to buy but rather due to the significant increase in the cost of financing a mortgage. If the truth were told and if someone were in a position to buy a house in today’s economic situation or housing market, there may be an opportunity to purchase a good residence despite the higher interest rates being charged with the understanding that it will be refinanced once rates decline to a more manageable level. But between now and that point, somewhere in the unknown future, be prepared for a much higher monthly mortgage payment on any new or refinanced real estate.
Though I have yet to explain a lot or even say something you agree with. The present is full of interesting opportunities for some. If you can afford it, there are a lot of houses on the market and reduced prices from earlier highs. There are numerous market opportunities to get quality stocks off their 52-week highs. If you are a conservative investor, the interest rates paid in CDs and Treasuries are up considerably, offering you an opportunity.
It is not all gloom and doom, but the present is bleak and not as bright as we would like it to be. The main takeaway from this post is this be wise in your actions involving your finances. But do not ignore an opportunity that presents itself to you, either.
Here is to the New Year and the unknowns that await us all! I look forward to interacting with you once again and if you would like to speak with me, feel free to make an appointment at https://calendly.com/kgmeyer/15min.
