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April Market Insight
A healthy economy encourages investment in a broad range of business ventures and investment options. However, an excessively accommodative economic environment can decrease the value of money, leading to inflationary pressures as consumers and investors prioritize trends over fundamental value.
This is the current challenge of the Federal Reserve. Despite the Fed increasing short-term rates over 500 basis points between 2022 and 2023 to stem inflation, the economy continues to show vibrancy and strength. The unemployment rate remains less than 4%, nearly 9 million jobs are available, and claims for financial assistance are manageable. Up to this point, the Fed has been able to reduce inflation while still allowing for economic growth. However, reducing short-term rates too soon risks another period of pronounced inflation, requiring further rate increases and potentially leading to a recession.
The Fed’s cautious approach of maintaining current rates appears to be the preferable policy. Our investment team is actively allocating capital to areas valued in the current environment, while carefully considering the impact of any changes to the Fed’s future path. The market has embraced this sentiment, and we believe this trend will continue.
