| Hi Taylor
- I've got a pretty broad question for you: how's the economy doing?
I hear about inflation and the price of eggs and all this stuff, but
I haven't heard the word recession in a while and I'm just sort of
wondering if things are bad or good right now?
Hi Arlo - This question sums up our information consumption so
well. News is always delivered to us as either terrible or awesome,
and no one ever tells us the general state of things.
Part of that is because it's hard to give a thumbs up or thumbs down
to all the variables that influence our economic outlook. I'd say,
right now, things are pretty good. That, of course, could change,
so I'll get a little more specific and offer some caveats.
and sales. These two metrics have been good, and getting better,
over the last few months. January saw retail spending the likes
of which we hadn't seen in almost two years, and the unemployment
rate has been historically low ever since it became historically
high during the pandemic. On paper, this means people have jobs
and they're spending money. No matter how you dice it, those are
good things. The more jobs we can add, the more money gets pumped
back into all sectors of commerce. It's very much a rising-tide-lifts-all-ships
situation, and you can see the markets reacting every month when
retail and jobs data comes out.
2. Inflation. Here's where the nuance comes in and why it
might sound like good news is bad news. Inflation is still a few
percentage points higher than we want it to be, making the cost
of goods higher than normal. People are still out there buying
things, but overpaying for everyday items (like eggs) will start
to catch up with consumers, and either drive them into debt or
drive them away from the stores. It's hard to get too excited
about good jobs data when those same numbers are part of the reason
inflation has been slow to recede.
3. The solution. The fed has raised interest rates consistently
over the last year+, and as long as inflation is up, it seems
like the plan is to stick with rate hikes. This is usually where
the doomsday talk comes in; a hot economy is a catalyst for inflation,
so the rising interest rates are meant to slow inflation by halting
growth. If the pendulum swings too far, we run the risk of backsliding
into a recession. This is the main reason we can't fully celebrate
economic wins until inflation truly slows down.
| Short answer:
things are OK! The longer answer: things could be better, and there's
definitely some potential for bad on the horizon. More important answer:
how do you feel, and what can you do to make your money go further?
Don't waste time listening to the talking heads if it only gives you
anxiety. Get out there and live your life! Thanks for the question,
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an offer or solicitation for the sale or purchase of any specific
securities, investments, or investment strategies. Investments involve
risk and, unless otherwise stated, are not guaranteed. Be sure to
first consult with a qualified financial adviser and/or tax professional
before implementing any strategy discussed herein. To submit a question
to be answered in this column, please send it via email to Question@GoFarWithKovar.com,
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