From Websters Dictionary:
re·sil·ience ri-ˈzil-yən(t)s1: the capability of a strained body to recover its size and shape after deformation caused especially by compressive stress2: an ability to recover from or adjust easily to misfortune or change
Mid Term Elections
In general order but perhaps not specific, the above are some of the issues that the US economy and its citizens have had to deal with in 2022. It even excludes supply shortages, workforce shortages, fentanyl surge, border concerns, crypto crash, crime wave, soaring energy prices, FTX collapse and extreme weather to name a few. Either list could be enough to create havoc in the markets and our lives and perhaps for a short time they did. But we are…… resilient – the ability to recover from misfortune or change.
After yet another rough start to the year, we have recovered and rebounded from covid. Maybe it was herd immunity by those who were vaccinated and by those who contracted it and survived or maybe it was the virus mutating to a less deadly form or maybe it was the human body’s ability to be resilient or even, luck. Nonetheless, covid is no longer considered an epidemic and by some perspectives, over.
Russia’s invasion of Ukraine shocked the world. Shamefully, it is now approaching its one-year anniversary. The death and destruction on both sides has been enormous. Yet the people of Ukraine have proven their courage, will and perseverance. No one could fault them for surrendering. But they haven’t and I’ll guess they wont ever. Even after the war ends, they will have a long road ahead to repair, rebuilding and recovery. I’m sure they will, they are resilient.
Inflation skyrocketed in 2022 with CPI starting the year at 7.48% in Jan and thus far peaking in June at 9.06%. The last reading at the time of this writing was 7.11% for Nov. After years of inflation of 2% and 3% this year’s spike was a shock to many. Food, gas, energy, housing, clothing prices all moved higher giving us less purchasing power and less to save and invest. Fortunately, inflation is trending lower. Unfortunately, thanks to much higher interest rates which are intended to choke off inflation, the higher interest rates lessen the present value of future cash flows. This leads to lower asset valuations and thus the market decline. From its high in January to its low in October, the S&P500 was down approximately -25%. It has since been attempting to recover some lost ground as investors are trying to decide if the worst is behind us, if inflation truly has peaked, will the fed not have to raise interest rates too much further and will we have a recession. As of this writing the S&P is up almost 7% off the bottom. Investors are showing their resiliency.
The mid- term elections brought personal attacks, misleading ads, mis-directions, in some cases lies, investigable results, and lots of anger and finger pointing. In my opinion, the process should be overhauled to shorten the time spent campaigning and advertising, not allow personal attacks and misleading ads, require debates, eliminate media bias and dis-information and provide a secure and confident voting process. One can only dream about the latter parts but something needs to be done. Nonetheless, we have our results and have moved forward. We are resilient.
Will the US economy fall into a recession? Some people believe we may have already begun. The inverted yield curve is always an ominous sign for recession. Some layoffs have already taken place or been announced. The Fed has eased off its pace of raising short term interest rates with its latest coming in at 50bps vs 75bps for the priors. Will they slow down even more? That depends on inflation and the economy. The duration and severity of a recession will impact how quickly we rebound. In any event we will recover and rebound. The markets and investors are resilient.
In short, we as humans are resilient. We as the US are resilient. We as First State Trust Co are resilient. We will continue to adapt, adjust, overcome and move forward. We have worked with and guided our clients and beneficiaries through these difficult issues. We have adjusted and adapted to new rules, regulations, trains of thought and ways to work. We work with our partners to be a resource for them and improve our service. We hope to have learned, to have grown and to be better off for it. We know that 2023 may bring some of the same issues and obstacles as well as new ones, but at the end of the day, we will move forward.
To quote the great Dr. Martin Luther King Jr.-
If you can’t fly, you run,
If you can’t run, you walk
If you can’t walk, you crawl
But no matter what, you keep moving forward!
Here’s to a fruitful 2023!
James Okamura, President
First State Trust Company
The posts expressed are views of FSTC and are not intended as advice or recommendations. For informational purposes only. FSTC does not offer tax, legal, or investment advice, professional counsel should be sought for tax or legal advice.