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The Inflation Shock Is Here

Hello and welcome to our Market Alert Video for today, which is September 22, 2023, and thank you for watching. I want to dive into a lot of news we’ve gotten we’ve got the strike with UAW, we’ve got the Federal Reserve, we’ve got the debt, the government shutdown, so we got a lot to talk about. But before we do that, I gotta tell you something that’s going on, my oldest daughter, and we have a grandson from her. His name is Nathaniel, but my daughter is actually celebrating, she’s on vacation with her husband celebrating their wedding anniversary. And so we’ve gotten Nathaniel for this week, and I’ve decided to call our evening ritual, the night-night battle, or the Battle of the night-night. So we tried, you know, you want to think of ways to coax him, you know, to go to bed, to go night-night, so we came up with do you want to read stories? Well, he’s too smart for that. He figured that one out. No. Okay. Do you want to put jammies on? No? He doesn’t he want to go up the stairs because he knows what’s upstairs. So anyway, we take him upstairs, and he’s wriggling and trying to, you know, it’s like, you’re afraid you’re gonna drop him. He just is screaming his brains out, put him in his crib, close the door, turn the lights off. And he’s in there screaming so loudly that I’m pretty sure the neighbors are gonna call the cops because we’re beating our grandson. And so you know, and he was relentless. He just will not stop screaming. And so you know, my wife is like, Okay, I’m gonna go back in there. No, you are not going back in there. You are not going to reward that behavior. Well, maybe he’s hungry. Hungry?! You just fed him. He’s not hungry. He’s manipulating you do not cave. Well, of course she does cave. She goes in there. And then they have to read stories and all that. Yeah, I tell you, two year olds are the best manipulators on the planet. They’re so good man. And they’re cute. They get away with it.
Anyway, let’s talk about what’s going on with the Federal Reserve inflation, the UAW strike. So, as you guys know, our fearless forecast this year was that inflation would bottom in June near 3%, which is what it did. And then we said that it would trend back up it by the end of this year, to around 4%. And it’s gotten there faster than we thought, it in August, the inflation rate had risen to 3.7%. So now we’re looking at the potential that inflation may get back above closer to 5%. So the Federal Reserve this week addressed that. And they said, Yeah, guess what, kids? We’re not going to raise interest rates this time, but probably, potentially not probably potentially, we might raise interest rates two more times. And, you know, our job is not done and inflation has not come under control. And so that was not well received, the market went down quite a bit after that news. So this is the inflation shock that we’ve been telling you is going to come right, we said that a lot of people were overestimating, you know, the efficacy of the Federal Reserve and how well they were going to get inflation down, and how soon they’re going to start lowering interest rates. And we felt that there was a little over excitement about that. And now that’s playing itself out.
So where do we go from here? We believe that if you look at the three things that are worrying people right now, the big ones, the UAW strike, that’s the first one. And we don’t think that’s going to be a big impact on the economy. And we don’t think it’s gonna last that long, either. And the reason why is because the UAW neither side, one can win this, you know, strike, neither side really can win. The UAW has a fund of $850 million, that they have available to pay the unemployment, you know, when people are on strike, they don’t get paid. So they they’re gonna pay them, plus, the automakers are now laying people off, so they got to pay them. And they can blow through that $850 million pretty quickly on the other side of the coin, so they don’t have that much staying power. The other side of the coin is the automakers themselves are losing massive amounts of profits. And they don’t want to do that either. So we don’t think this is going to last very long, they’ll probably come to some terms. And so yes, it’ll have a short term impact, psychological impact, but we don’t think it’ll be, causes to have a recession all by itself.
The other thing is the debt ceiling and the government shutdown, and it’s looking more and more like, that’s going to be a possibility. And so what about that? Well, we do have history about that. It’s happened twice before while we’ve been in business. And in both cases, the market didn’t like it, but recovered quickly after that. So we don’t anticipate that it’s going to be a big cause of a recession either. On the Federal Reserve side, if they raise interest rates too high, they could cause a recession, because they’ve raised them so quickly, and that could be detrimental, could cause the economy to fall into recession. Now all three of them could happen, in which case, we could have a really bad bear market and recession.
So we don’t think that’s going to be the case, though, we think that these things will take care of themselves, and we should be fine. So we think the stock market, we continue to think that our equity portfolios should be higher at the end of this year than they are today. So that’s why we’re still in our stock portfolios. On the bond side, not, we’re not ready to go back into that yet, either. Or not back into that at this point, because we don’t think the Fed is going to start lowering interest rates until April of next year. And so because of that we don’t want, and they might raise interest rates to more times, bonds tend to lose value in those kinds of scenarios. So we don’t want to go into that. In our money market fund urrently, we’re being paid 5%, or a little more than that, actually. So we’re getting rewarded for waiting and for being safe on that side of the coin. So that’s why we’re not going to buy bonds yet. We’ll wait till next year, probably. So that’s kind of the big picture on everything. So things are playing out sort of, kind of what we the way we thought the wildcards, of course, are is the strike and the government shutdown. And we’ll see how those play out.
The important thing that we want you to know is that you want to let us worry about this so that you don’t have to your job is to be a SCWPer. Your job is to go play to enjoy your second childhood without parental supervision, to enjoy your grandchild, grandchildren to travel to do all the stuff that you’ve all you’ve put off all these years, because now you’re retired, you want to enjoy that. And for those of you are not retired yet, you’re not a SCWPer yet. Our job is to get you there. And we’re very, very glad and thankful and honored that you’ve given us your trust to help you to get there. So share this video with as many of your friends as you possibly can. Please recommend us to any of your business associates or friends or anybody that you know, that is kind of in the demographic that we’d like to work with. We want to help them we’ll treat them well as you know, and we’ll do our best for them. All right, so thank you for watching this video and we will talk soon!

Please note: transcript has been modified after the time of recording. 

Economic indicators and stock market performance cannot be predicted. Opinions expressed regarding the economy and the stock market belong solely to Ken Moraif on behalf of Retirement Planners of America and may not accurately portray actual future performance of the economy or stock market outcomes. Opinions expressed in this video is intended to be for informational purposes only and is not intended to be used as investment advice for individuals who are not clients of Retirement Planners of America. All content provided is the opinion of Ken Moraif, CEO and Founder of MMWKM Advisors LLC (d/b/a Retirement Planners of America). ©Copyright 2023