As we head into another family day weekend, If you're a baby boomer like me, you probably have a dual perspective on the family road trip.
One as an adult with kids in a climate-controlled vehicle while everyone is pleasantly distracted with a cold drink, their own entertainment screens and headphones. Or the other as a kid in a 1970 woody station wagon in soul-crushing heat, no air conditioning, with Johnny Cash's Orange Blossom Special blaring but only just barely enough to drown out the constant bickering of my two younger siblings.
That being said, in both cases, there were often 'pit-stops' along the way—those that we anticipated, like stopping for meals or gas, and those that were unexpected, like road construction or a flat tire. But, despite these short-term setbacks, we would inevitably reach our destination.
During the past two years, the investment landscape has looked a bit like a road trip, complete with detours and bumps along the way. This coming March will mark the second anniversary of the pandemic. In the second half of last year, rising inflation and supply chain issues made headlines, and in the last weeks of December, COVID-19 cases soared again due to the Omicron variant. Then, sprinkle in this year's geopolitical issues, including the Russia Ukraine conflict playing out in real-time before our eyes, and you could see why even a 1970's road trip with the Fam might look appealing.
As we settle into a new year, we realize that it will take some time yet for the world to get a handle on the pandemic and face the possibility of rising interest rates to combat inflation. The Federal Reserve appeared to be in denial over the building inflationary pressures. With comments like this back in December 2021, they said, "the Committee expects it will be appropriate to maintain this [0 to ¼ percent] target range. There has been a 180-degree turn since that mid-December message. You can expect rate hikes to follow soon.
Although economic activity is expected to slow and will face continued challenges, including supply chain disruptions, overall, the global manufacturing environment remains in a resilient position. Companies predict that production will be higher a year from now, and historically, a strong manufacturing sector provides a healthy environment for earnings.
A well-balanced portfolio will be paramount. Implementing an asset allocation and dollar-cost averaging strategy throughout the pandemic has worked well for investors. That approach is still wise today. Of course, a correction in the near term is entirely possible, but we need to take these 'pit stops' in stride and focus on the road ahead to make sure we arrive at our destination.
As always, if you have any questions about the markets or your investments, I'm here to talk.