Market Update
Stocks Climb as Recession Fears Ease
Investors shrugged off weekend news of a short-lived insurrection in Russia and calls later in the week for more restrictive monetary policies from global central bankers.
What powered early-week gains? New home sales, durable goods orders, and a rise in consumer confidence proved influential. More so were Thursday’s reports of a drop in initial jobless claims and an upward revision in first quarter Gross Domestic Product growth, which helped allay recession fears. The results of the Fed’s annual bank stress tests, which all major banks passed–further emboldened investors.
Stock prices rallied Friday following an encouraging inflation report, capping the end to a solid week, month, and first half.
Global Central Bankers Meet
At last week’s European Central Bank Forum, central-bank governors from around the world gathered to discuss their monetary outlook and the policies needed to manage inflation amid unexpected economic strength.
Fed Chair Powell reiterated that more rate hikes were coming owing to a robust labor market. He added that he wouldn’t dismiss the idea of hiking rates at consecutive Federal Open Market Committee (FOMC) meetings. While saying there is a possibility of an economic downturn, Powell didn’t
believe it was the most likely case.
Meanwhile, bankers from the European Central Bank and the U.K. echoed Powell’s comments, declaring that further rate hikes are needed to tame their still-elevated inflation rates.1
Fed Hits Pause Button On Rate Hikes...For Now
Jerome Powell skipped an interest rate hike at the Fed’s June meeting, but the market isn’t buying what the Fed Chair is selling about what’s next with short-term rates.
Powell signaled that two more rate increases may still be in store for later this year and indicated that “we’re talking about a couple of years out” before the Fed might cut rates.2
But that’s not what market participants anticipate. As you can see in the accompanying chart, most see one more rate increase later this year, and the consensus sees rates trending lower as early as December 2023.3
To Powell’s credit, he said the Fed hasn’t yet decided on July’s policy, which means all eyes will closely watch economic reports such as the Consumer Price Index (CPI). As you can see in the other chart, next month the whopping 1.2% increase from June 2022 will be dropped from the 12-month rate.4
The Cleveland Fed, which published the widely followed Inflation Nowcasting tool, is forecasting a 3.22% annual rate for CPI in June 2023. That’s getting close to the Fed’s long-term inflation target of 2.0%.
But I can understand why Fed Chair Powell is conservative with his interest rate outlook. He was the same person who tried to convince the markets that “inflation was transitory” in early 2021. He doesn’t want his legacy as Fed Chair to be that he underestimated inflation – twice!
Navigating monetary policy in recent years has been extremely challenging. But I expect the Fed will be happy to report upbeat news in the months ahead if warranted.
Student Loan Payments to Resume in October
The U.S. Department of Education has officially announced that student loan payments will resume in October, ending the three-year-long pause that was implemented due to the pandemic.
This means that starting September 1, interest will begin accruing on student loan debt.
Additionally, the Supreme Court blocked the Biden administration's student loan forgiveness plan last week, rejecting a program aimed at delivering up to $20,000 of relief to millions of borrowers struggling with outstanding debt. While Biden quickly released a statement in response to the ruling saying he is "not done fighting yet" and that they were "prepared for this scenario"5, it is always best to assume that relief is not guaranteed.
Around 40 million Americans have educational debt, including many of our clients. If you currently have outstanding student loans, now is the time to get reacquainted with your account details to be sure you are prepared to resume payments, as exact due dates may vary.
If you're a GTS Financial client with student loan debt, remember we are here for you. We would be happy to help you construct your repayment strategy to fit your financial life today.
The Limits to Writing Your Own Life Story
The writer John Barth once said, “Everyone is necessarily the hero of their own life story.” Modern research agrees. There are numerous studies that demonstrate a strong link between storytelling, resilience, and overall life satisfaction.
It is important to note, the majority of those studies that show a benefit to a narrative orientation, or one in which you consider your life a story, are backward-looking. Having a narrative is useful for integrating past events into a story of your life that makes sense and feels good to you.
But what about looking forward? What if the story you're telling yourself now is limiting you from reaching your fullest potential in the future?
According to author Brad Stulberg, if your narrative orientation towards life is too powerful, you may unknowingly impose artificial limits and constraints on what you could do next. Your trajectory becomes set in stone, and you may fail to change or even realize that change is possible when it may be the best path forward for your life. Stulberg says in The Growth Equation blog, "A good story almost never radically changes course. A good life often does."
Like so many other powerful concepts, having a well-worn, cohesive story to make sense of your life can be a fantastic tool...until it becomes the very thing that stands in the way of your next success. Therefore, Stulberg proposes you use a narrative orientation when it serves you, but never be afraid to release it when you're ready to write the exciting next chapters of your life.6
Why Sleep Is Your Superpower
Sleep is your life-support system and Mother Nature's best effort yet at immortality, says sleep scientist Matt Walker. Here are three big reasons why sleep is so powerful:
- Sleep is essential for memory consolidation. Sleep is essential for memory consolidation. When we sleep, our brains go through a process of consolidating memories, which means strengthening and storing them so that we can access them later. Without enough sleep, we are not able to consolidate memories effectively, which can lead to problems with learning and remembering information.
- Sleep is important for immune function. While we sleep, our bodies produce immune cells and proteins that help to fight off infection. When we don't get enough sleep, our immune system is weakened, which makes us more susceptible to illness.
- Sleep is essential for mood regulation. When we don't get enough sleep, we are more likely to experience negative emotions such as anxiety, depression, and irritability. Sleep helps to regulate our emotions by clearing out toxins from the brain and promoting the production of mood-boosting neurotransmitters.
Click below to watch Dr. Walker's TED Talk on sleep and be sure to catch your Zzz's!