Inflation, recession, shutdowns, oh my!

These three things will continue to dominate the news for a while, so I thought I would briefly cover them in a market update. Note that I am solely focused on their impacts to investments and not on your day-to-day life, as those can be very different.

Inflation is certainly higher than average right now at 3.7%, but due to the actions of the Federal Reserve, it is far lower than a year ago when it was 8.3%. This reduction has had a positive impact on stock prices as the prices of inputs are not growing as fast. Also, depending on where you bank, you should have been seeing much higher interest deposits into your savings account, which is a good thing!

While we are not officially in a recession, one will happen eventually. A recession happens on average every 6 ½ years, and they are not generally even close to the severity of the ones we had in 2008 and 2020. The US consumer is still strong, as evidenced by the success of Amazon Prime Day, the Taylor Swift tour, and packed college and pro football stadiums, among other things. Whether we ever enter into a technical recession has no bearing on a diversified long-term investment portfolio, which is what you have.

Government shutdowns tend to be high profile and have little actual impact. I do think that there will be a shutdown and, like the nearly two-dozen before it, it will likely be brief. Shutdowns make the markets jittery due to the uncertainty but, on average, the markets roar back when they are over, gaining back all of the losses and more over the following months. Also, markets have already come down a good amount since July, so there’s not too much farther to go over the next few days/weeks.

In summary, I am not worried about the long-term investing environment, and I don’t think that you should be either.

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