I hope you and your family are doing well!
We experienced a turbulent year in 2022 as global central banks, led by the U.S. Federal Reserve, tackled inflation and the global economy cooled. While we can’t know exactly when the turbulence will end, the economy and markets have already made meaningful progress toward rebalancing.
Inflation has started to recede, a process we believe will continue in 2023, even if it will likely take some time to fully return to normal. U.S. Federal Reserve rate hikes will very likely end in the first half of 2023, although rates may remain at a restrictive level throughout the year. Labor markets, which had remained tight despite high inflation, have started to loosen. Voters have even chosen a more balanced government in Washington—with a single party no longer controlling the presidency, House, and Senate.
Even as the environment remains uncertain, the ongoing process of finding a balance may be starting to create opportunities for investors. Higher interest rates bring a much improved outlook for bonds, which have not seen yields at these levels in many areas of the market in more than a decade. At the same time, segments of the stock market that had become expensive have become more fairly priced, while other segments actually look relatively cheap.
Knowing when to shift toward opportunities is also a balancing act. We need to account for the ongoing risk from inflation, a possible recession, and global conflicts; while also understanding that markets are always forward looking, and thus anticipating the changes that they may respond to.
Ultimately, we believe the best path forward for staying focused in any environment is having a thoughtful plan and the right support. Together, they can help us maintain our balance even during the most challenging market periods.
I wish you and your family a wonderful holiday season and the happiest of the 2023 New Year!
If you have any questions or if we can help you work towards your financial goals please let me know!
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This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. The opinions voiced in this material are for general information only are not intended to provide specific advice or recommendations for any individual.
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