Where Are Interest Rates Headed with U.S. Inflation?
April 11, 2022
Welcome to Wealth Enhancement & Preservation’s Market Minute, where we get to update you on everything that happened in the financial markets this past week. My name is Jake Sanders, and I am a partner at Wealth E&P and operate as a Wealth Advisor and Certified Financial Planner. I hope that you had a great week, and if you were on Spring Break, perhaps you had a good time with family and friends.
Last week, in regards to the markets, we saw a decline in all three of the major indices. This is driven largely by the continuation of the hawkish tone that the Fed is taking around inflation and interest rate hikes. It's also exasperated a little bit by the war in Ukraine and the subsequent supply chain issues that have been created as a result of that. In general, there are also just inflation fears about the future.
We've been talking a lot, at the risk of beating a dead horse, about inflation and interest rate hikes. I want to address that a little bit more here today.
You'll see that real-time inflation on the core level is roughly 6.5% as of the end of February. Total inflation is pushing to be 8% in real-time, and I suspect that it is going to be even higher when the next report is published. Now, what does that mean?
Pragmatically, if you're somebody who has been thinking about refinancing your home, or perhaps you’re sitting on an adjustable-rate mortgage or HELOC, now would be a good time to act on that. Inflation has driven mortgage rates higher, but you can still get a good 30-year interest rate in the 4s; this is higher than it has been, but in regards to historical context, it is still a pretty good rate.
Secondly, what does that mean for equities? What does that mean for the stock market? What does that mean for your portfolio? Well, perhaps now more than it has been in a long time, we believe that asset allocation really matters. In other words, gone are the days of just throwing a dart against a board and seeing an equity position go up, regardless of where it is.
If you have any questions about how we’re handling all of this here at Wealth E&P, we would love to hear from you. If you have any other questions for us about your portfolio, financial situation, or retirement, please feel free to reach out or visit www.wealthep.com. Otherwise, stay tuned for our next Market Minute! We hope you all have a wonderful week.
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