Can the Federal Reserve fix inflation

You have had a week to reflect on the “sell discipline” we discussed last week. I hope you are more clear now about when (and if) you should sell an investment that has fundamentally changed. Sometimes important things do change in negative ways. For example, whatever existed (perhaps a good dividend) that originally caught your interest- leading you to invest in something-looks like it will not sustain into the future. That could trigger a sell decision. However, just because something unrelated to the solid business model that once appealed to you has caused the price (not the value) to drop, it is no reason to head for the exits.

This week the mantra remains pretty much the same. The short term for the market looks pretty ugly. However, later this year-and into next year things look much better. Personally, I’m not changing anything based on recent market activity. I will always look for good “entry points” to purchase anything with a good tax-favored dividend and a great management team.

Having said that, I would be remiss not to mention Brian Wesbury’s Monday Morning Outlook. He goes into great detail about the fight between the Federal Reserve and inflation. In short, he explains that the ugly monster is the result of money supply growth-which can’t be controlled by simply raising interest rates. We are in unchartered territory with way too much money in the system chasing too few goods. Can it be corrected? He says yes. Former Federal Reserve Chairman Paul Volcker and then President Ronald Reagan did it in the late 1970’s/early 1980’s. By slowing the growth of money supply, Volcker took the Federal Reserve out of the business of “juicing” the economy. By cutting tax rates and reducing regulations Reagan revived the private sector. It helped that they also shrank the size and scope of the federal government. Believe it or not, there are some smart people around these days that can do similar things. What got us here (pandemic relief-PPP loans, government stimulus checks, etc) today is different than the prevailing conditions in the 1970’s, but there is a way out.* So on that subject we’ll have to wait hopefully and watch.

In the meantime, speaking of things that have changed-and have an economic impact, I ran into some reportable topics this week. As you know, we are an aging population. Later this month I will turn 70 myself! I have alerted Social Security to start sending me a monthly check. I waited until the last minute so as to maximize the payment, and there is no advantage in deferring past age 70. Hopefully, I’ll live long enough to recoup some of the income I could have received for the past several years. If not, my wife will. Of particular interest, in 2019, 16.5% of Americans were 65 or older. By 2030 (in just 8 years) that number increases to 1 in 5 or 20% of our population.**. This certainly has financial implications as I’m depending on you youngsters to make your deposits into the system. My monthly checks and a meaningful portion of my medical bills will be depending on you! Just as my parents’ generation depended on my contributions to government programs for their 65+ crowd.

Another really dire, but factual piece of information: More Americans died in 2021 than any year in American history.*** This includes the years during the Civil War (1860-1865). Of course, cancer and heart disease always lead the pack, but the fact that we are now at 1.021 million covid related deaths since the beginning of the Pandemic was certainly a factor.**** It is a shame, but though the virus related death and hospitalization rates are dramatically reduced, we obviously are not out of the woods on that front either.

However, let me close on a positive note quoting one of my dear friends from the Seekers Sunday School class at First United Methodist Church: “Don’t ever bet against America!” Last Sunday our class was treated to a wonderful message on HOPE and even a roughly read rendition of Merle Haggard’s “Are the good times really over for good?”. In 1981 he first recorded the song, and I leave you with his closing lines, “The best of the free life is still yet to come. The good times ain’t over for good!”*****

The opinions, forecasts, and views expressed here are those of Tommy Williams and do not necessarily represent those of Williams Financial Advisors, Private Client Services, RFG Advisory, their employees, or their clients.

This material is for educational and informational purposes only. It is not legal, tax, or investment advice, nor a recommendation to buy, sell, or hold any specific security, nor an endorsement of any specific trading strategy. Always consult an attorney or tax professional regarding your specific legal or tax situation.

Securities offered by Registered Representatives through Private Client Services, member FINRA/SIPC. Advisory products and services offered by Investment Advisory Representatives through RFG Advisory, a Registered Investment Advisor. RFG Advisory, Williams Financial Advisors, LLC, and Private Client Services are unaffiliated entities. No advisory

*Brian Wesbury, Chief Economist -First Trust, Monday Morning Outlook weekly commentary, dated 7/18/22, entitled Refocusing the Fed

**https://www.census.gov/library/stories/2019/12/by-2030

***nytimes.com/interactive/2021/us/covid-cases.html

****thehill.com/homenews/state-watch/3266217-cdc-2021-was-americas-deadliest-year-ever/

*****https://www.azlyrics.com>M>Merle Haggard Lyrics

This article originally appeared on Shreveport Times: Can the Federal Reserve fix inflation