The reopening of our domestic economy went surprisingly well last year with the economy growing at an amazing 5.7%001 in spite of multiple pandemic surges. With the effects of COVID stimulus money waning, economists expect a slower growth economy with higher than desired inflation.
The pandemic has fast-tracked the trend toward digital transformation002. Some workers have grown accustomed to working remotely, which made 2021 the year of the Great resignation003, which has forced some CEOs to evaluate the benefits&drawbacks004 of the virtual office as employees seek more flexible work environments. Online commerce and the virtual workplace became prevalent as a result of shelter-in-place mandates, which has benefited some properties while hurting others. Fortunately for landlords, Commercial properties are usually under multi-year lease005 contracts with cancellation penalty clauses. However, vacancy rates may creep higher as leases come up for renewal.
With the country reopening as COVID restrictions are lifted, the market rallied into year-end and became priced for perfection011. Rising inflation and Russia’s invasion of Ukraine disrupted the Bull market sending the S&P 500 into correction territory012. Also weighing on the market is that of mid-term election concerns013, which tend to exacerbate market volatility. The long awaited rotation from Growth stocks to Value stocks014, which are more reasonably priced, may finally be upon us. Where markets go from here depends on a lot of unknowns.
Shortages of labor, materials and finish products are causing elevated inflation with the Federal Reserve signaling up to seven rate hikes006 to combat inflation. With the economy being near full employment, businesses compete for employees resulting in rising wages and making wage-price spiral007 inflation a concern. Supply chain problems persist008 and may get worse due to sanctions on Russia and China’s recent COVID lockdown009. Bolstered by the America Competes Act of 2022, supply chain fragility has some companies looking to source more production domestically010. These changes will have long lasting implications but take significant time to implement.
With increased volatility from war, inflation at forty-year highs015 and markets possibly overvalued016, it may be a good time to consider rebalancing or reevaluating your overall portfolio, especially for those nearing retirement. The rebalancing process, which restores a portfolio back to its desired risk profile, is a technique utilized for managing risk017 to ensure proper asset allocation and diversification pursuant to your investment needs, objectives and risk tolerance.
Chance favors the prepared mind018! The U.S. economy is strong but 2022 will likely be a challenging investment environment with consumer confidence hitting a decade low019. This could lead to demand destruction020 as consumers struggle with higher prices for food, fuel, and shelter021. Therefore, Caution is the watchword. If you have concerns with your portfolio because of market volatility or geopolitical events, a member of the Iron Belt Partners Team will gladly discuss those concerns and schedule an appointment to meet if necessary.
We can be contacted via phone at (724) 493-9473 or via Email at:
Lindsay M. Turchetta LTurchetta@lpl.com
John D. Martin JDMartin@lpl.com
Working as a Team to better serve our clients.
This communication is meant to be general in nature and should not be construed as investment or financial advice related to your personal situation. You should consult your tax, legal, and/or financial advisor prior to making any financial decisions. The views expressed here are those of the authors, John Martin & Lindsay Turchetta, and not necessarily those of LPL Financial. Information is based on data gathered from what are believed to be reliable sources. The opinions, and other information contained in this article are subject to change continually and without notice of any kind. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time and may not come to pass.
All performance referenced is historical and NO guarantee of future results.
Investments are not guaranteed and are subject to investment risk including the possible loss of principal.
The index references herein are unmanaged and cannot be directly invested into.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. No strategy assures success or protects against loss.
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC
Iron Belt Partners is a separate entity and not affiliated with LPL Financial.
017Source: Rebalancing, diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets. They are methods used to help manage portfolio risk. Also, rebalancing may have fees and tax consequences so please consult with a tax and financial advisor prior to making financial decisions.
001 Source: “US Economy grew by robust 5.7% in 2021” on nationworldnews.com by Nation World News Desk
002 Source: “How The COVID-19 Pandemic Is Fast-Tracking Digital Transformation In Companies” on forbes.com
003 Source: “The Great Resignation show no signs of slowing down” on CNBC.com by Greg Lacurci
004 Source: “Understanding the Pros and Cons of Virtual Office Spaces: Part 1 & Part 2” on stat.international
005 Source: “What does COVID mean for Commercial Real Estate?” on geophy.com by Nils Kok
006 Source: “FED begins inflation fight with key rate hike” on news.yahoo.com by Christopher Rugaber
007 Source: “Beware the Wage-Price Spiral” on American consequences.com by David Eifrig
008 Source: “The United States Needs to Reshape Global Supply Chains” on foreignpolicy.com by Aaron Friedberg
009 Source: “Covid-19 cases continue to rise in China's worst outbreak since Wuhan” on cnn.com by CNN’s Beijing Bureau
010 Source: “Intel to build $20B Ohio factory amid chip shortage” on thehill.com by Lexi Lonas
011 Source: “US stocks are 'priced to perfection and vulnerable” on businessinsider.in by Emily Graffeo
012 Source: “Stocks open higher a day after S&P 500 enters correction territory” on marketwatch.com by William Watts
013 Source: “Midterm Election Years - Correction & Rebound” on cambiar.com
014 Source: “Why U.S. value stocks are poised to outperform growth” on investor.vanguard.com by Kevin DiCiurcio
015 Source: “US inflation highest in 40 years, with no letup in sight” on abcnews.go.com by Christopher Rugaber
016 Source: “Price-Earnings Ratio suggests that the US stock market is Overvalued” on currentmarketvaluation.com
018 Source: “Chance favors the prepared mind” quote by Louis Pasture
019 Source: “Consumer Sentiment Hits New Low in Early March 2022” on investopedia.com
020 Source: “Demand Destruction” on investopedia.com
021 Source: “There is ‘nowhere to hide’ for consumers as inflation hits food, gas, housing” on cnbc.com by Greg Iacurci