Stagflation

Markets gifted us with another burst of volatility and headlines are looking apocalyptic again.  Some folks might think it's time to bail on markets for the summer, but I'll tell you why that thinking is a mistake.

First, let's peel back some layers to explore what's driving markets. (Want to discuss any concerns directly? Just click this  link  and let me know.) The latest selloff was largely driven by concerns about how the pace of Federal Reserve interest rate hikes could affect economic growth. The Fed's "hawkish" policy of rapidly rising interest rates to bring down inflation seems likely to take a chunk out of economic growth.

Is a recession or bear market on the way?  Those are risks we are prepared for.

While the Fed could manage to execute a "soft landing" and successfully lower inflation without triggering a downturn, its track record isn't so good. According to Schwab, 10 out of the last 13 rate-hike cycles resulted in a recession. Those aren't odds I'd want to take to Vegas.

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