Today's episode is once again going to be a bit off topic from equity compensation. I've been receiving more questions about inflation, markets, interest rates, and those associated items. It seems like now is a good time to tackle all these related topics. Rates are rising and contrary to popular belief that means the economy is doing well. Check out the episode as I explain!
You will want to hear this episode if you are interested in...
Interest rate hikes are coming
Interest rates have been at historically low for what seems like forever. It's important to remember that the FED, the Federal Reserve, raises interest rates when the economy is doing well. Let me repeat that. The FED raises interest rates when the economy is doing well.
Which it is!
Unemployment is low, wages are rising, the market is at an end of the year high, GDP is doing well, people continue to spend, and this all continues to prove how well the economy is doing. Now it's time to start reigning things in a bit. Interest rates cool down the market by forcing people to pay more for debt, expect things like mortgages, car payments, and credit cards to charge more.
Unfortunately, inflation continues to be high. I mentioned in my year end market highlights how both core and headline inflation numbers were higher than normal. As a reminder, core excludes food and energy numbers. The easiest way for the FED to battle or tame inflation is by raising interest rates. Raising rates takes money out of the economy so it should cool things down. The trick is not to raise them too early or too late. As well as too much or too little.
Talk about an easy job, right?
This week’s FLASHBACK: Dang snow days!
I am sitting here looking at a foot of fresh snow here in Akron and it reminds me of how I was totally cheated when it came to snow days! And YES, I’m still a little bitter about it! My last snow day was freshman year of high school. There were some snow days when I was in grad and undergrad but I didn’t even get to participate! How about you? Did you ever get snow days?
I’m Dan Johnson, CFP®, founder of Forward Thinking Wealth Management. I run a flat-fee financial planning and investment management firm located in beautiful Akron, OH. Although I am in Akron, OH, I work with clients regardless of location. I cater to owners of equity compensation positions who are looking to organize their financial lives, keep more of what they make, and do the things they want in retirement and even now.