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Tracking with the Feds: Like many things in life, tracking with the real economy takes a lot of work. It can also seem difficult to keep up with where we’re heading economically. Between our war with inflation and the current geopolitical climate, there is no shortage of news to process. We’ll be the first to tell you that we don’t know what the future holds. Anyone who claims they ‘know what’s next’ in an environment like this one is hard to take seriously.

Someone took it upon themselves to track the Fed’s comments for a bit. Here’s the result. What are your thoughts on it?

In a survey of economists in the Wall Street Journal, an average of 63% thought we might hit a recession in the next 12 months. But the views are quite varied. Only 11 out of the 58 economists (19%) who responded to the question are fairly certain of a recession over the next 12 months, assigning a probability of more than 80%. Twenty-two were less sure, with probabilities between 60-80%. Another 17 put odds close to a coin flip (40-60%), and eight were even below that. Bottom line: predictions are hard, especially for people who do this for a living, but we could say the same of the Federal Reserve Bank and its leadership.

2022’s Record: While the Phillies are RED HOT, the 2022 economic record not so much. In fact, it might be among the worst investing years in history. Since World War II, there have been three other instances when the S&P 500 ended the year down more than 20 percent (1974, 2002, and 2008). If 2022 had ended last week, it would have been the fourth.

Or another way to visualize it (below). The scatter plot shows annual returns for the S&P 500 (horizontal axis) and U.S. bonds (vertical axis). As you can see, 2022 falls in the undesirable quadrant, along with a few other years. Stocks have been knocked down, but so have bond prices as the Fed continues to hike rates at a historically fast pace. So, where do we go from here? Strategy and diversification. While it may not guarantee a positive return, it could potentially bridge the gap between losing a little and losing a lot. Reach out to your advisor today if you’d like to look into adding more diversification to your portfolio.

Business Briefing:

  • Twitter: Tesla CEO Elon Musk told potential investors that he would cut nearly 75% of Twitter’s 7,500 workers if his deal with the social media giant goes through. Twitter faces major reductions even if Musk doesn’t take over. The company’s management intends to slash its payroll by $800 million by the end of 2023. (The Washington Post)
  • Merger: Spirit Airlines shareholders approved a $3.8 billion takeover by JetBlue Airways, Spirit announced Wednesday. The merger must go through the final regulatory steps, and Spirit expects to close the transaction “no later than the first half of 2024.” (The New York Times)
  • IRS Raises 2023 Standard Deduction: On Tuesday, the IRS announced that it is increasing the standard deduction and income thresholds for all tax brackets in the 2023 tax year to adjust for high inflation. Paychecks will reflect the change beginning in January, with taxpayers getting more take-home pay due to adjustments in their withholding statements. The standard deduction will rise by $1,800 for married couples filing jointly, $1,400 for heads of households, and $900 for single taxpayers and married taxpayers filing separately. (The Hill)

Sweetheart Scam: If you or a loved one falls into the category of an older adult venturing into online dating, this one is for you. A caution: Sweetheart scams are the newest ways that crooks are swindling people out of their money. A sweetheart scam is when a person uses fake profiles on dating sites to engage victims, stir up romantic interest, and then ask for financial support. Seniors are a common target for these scams since they have more cash savings and a tendency to be trusting. New data from the Federal Trade Commission reported losses reaching a record $304 million in 2020. Add this to the long list of very good reasons to keep an eye on one another as we age.