Based on the latest Atlanta Fed GDP models, they are now predicting higher than expected economic growth for the rest of the year.
LCM Capital Management feels it’s important to reflect on a few things. In June 2021, Fed Chair Jerome Powell stated that the increase in inflation would be temporary. However, at the October 2021 Fed Reserve board meeting, officials projected that they might raise interest rates as early as 2023, a year earlier than initially anticipated. Additionally, Fed Chair Powell admitted that they have a limited understanding of inflation.
We want to remind everyone that the Federal Reserve consists of more than 400 PhD economists, and as mentioned earlier, if they cannot accurately predict every economic number, why should we believe that this time will be any different? Neither your advisor/brokerage firm nor their strategists or economists have the answers. We also don’t claim to have them.
Even Wall Street didn’t anticipate the significant rise in the stock market in 2023. Despite lacking certainty about the future, our industry often pretends to know what will happen next and what investments you should have.
Our suggestion is to maintain diversification and avoid trying to predict short-term outcomes. It’s a futile game promoted by Wall Street, where they always win, and investors usually lose.
Consider investing in SPY (SPDR S&P 500) for long-term equity diversification. If you believe, like we do, that interest rates are closer to their peak than their bottom, and you don’t have sufficient funds to buy individual bonds, then TLT (I-Shares 20+ year Treasury Bond ETF) could be an option. When interest rates eventually decrease, which is likely to happen, TLT should appreciate over the next few years, while also offering a 3% yield during the wait.