Quote of the Week

How To Navigate an Inflationary Environment

Inflation can be tricky for a number of reasons. A lot of people call it the "invisible tax". The dollar doesn't stretch as far as it did a year or two ago. So how do you navigate inflation? In this video, Barry and Austin tackle just that. As always, if you have any thoughts or questions, send us a message here or give us a call at 615.370.4040.

Market Thoughts

As a team, we read and research a lot about the economy to best serve our clients. This week, we wanted to share some of what we are reading in a section called The Good, The Bad, and The Uncertain.

The Good

• As of 10:45 am, the S&P 500 is up 15% since June 17th.

• Unlike '08, our banking system has sizeable cushions of liquidity and capital.

• Inflation is starting to slow, with commodity prices trending downward over the last month.

• The U.S. unemployment rate is at 3.5%, the lowest it has been in the last 50 years.

• There is over $2 trillion of excess consumer savings.

The Bad

• Half of the country has less than $400 in savings

• One-bedroom apartment rents are near $1,500 in many places

• United Airlines CEO Scott Kirby said in a recent interview that sickness-related absenteeism is now so high, that he thinks airlines will have to permanently add 4%-5% more workers just to accomplish the same amount of work. If a company now needs 1005 workers to produce the same output that used to be possible with 100 workers, it is negative productivity growth. Not good for profits and certainly not good for GDP.

• While inflation is starting to slow, it's still up over 8% since last year.

The Uncertain

• Some economists say a recession is triggered when we have two consecutive quarters of negative GDP. That happened in Q1 and Q2 of 2022. Do you recall any other recessions coinciding with record-low employment, plentiful job openings, and jammed airports?

• Although the current market rally is impressive, true recoveries don't usually occur in the shape of a V. We recovered without any bumps along the way in 2018 and 2020, but most market recoveries have had some pullbacks before they reached a new all-time high.

So what does all of this mean? Well, we don't have a crystal ball. With that being said, we still believe strongly in the long-term health of the U.S. economy and the stock market. Are we experiencing a true recovery and exit from the bear market or will there be some short-term speed bumps along the way? That remains to be seen. We see either as a possibility. Overall, we think valuations are relatively attractive. We would continue to encourage investors to buy good assets and hold for the long-term if possible. Bear markets average -33% historically, while Bull markets average 152%. The market will ebb and flow, but history has shown us that patience is rewarded.

Sources: Mauldin Economics/Raymond James Equity Portfolio and Technical Strategy/S&P 500/U.S. Labor Department/Bureau of Labor Statistics

As always, thanks for reading, and have a great weekend.

Any opinions are those of Barry McCall, Steve Alverson, and Austin Coley and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. This is not a recommendation to purchase or sell the stocks of the companies pictured/mentioned.
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