– US Federal Reserve raised short-term interest rates by 0.75% as they strive to get ahead of the higher-than expected 8%+ inflation. The size of the interest rate increase was the first in almost 30 years as the Fed seeks to convey their seriousness in combating inflation, especially after the slightly higher-than-expected CPI inflation report last Friday. US markets rebounded on the Fed news, but trading is bumpy. Al Hanser, Founder and Chairman of The Trust company said, “The Sanibel Captiva Trust Company has been caring for clients for more than 20 years, and during that time of operation we have experienced many periods of volatility in the markets. The company’s seasoned investment analysts and portfolio managers constantly monitor activity and offer insights on how to approach current conditions in relation to investor portfolios.”
What should investors expect over the coming summer months? We will likely see continued volatility across global equity markets as investors deal with the uncertainty of inflation trends and economic growth. They will be digesting periodic economic updates on inflation, consumer spending, jobs, and Gross Domestic Product (GDP), hoping to see when inflation has peaked and whether the Fed’s actions have cooled economic activity too much. It is reasonable to expect markets to rally and decline as these various reports are released and analyzed.
What should investors do? Long-term investors should adhere to their long-term investment allocation. The S&P 500 has already declined 20%+ from its January peak and the market could recover rapidly, well-ahead of any confirming economic data. That said, we would caution investors trying to market-time in this environment. The market could drift a little lower but move quickly into a recovery phase.
What opportunities does this market turmoil offer? Moving beyond the news headlines and benchmark returns, there are many high-quality companies that are trading at very attractive prices. For investors that would like to reduce their portfolio volatility, the short-term bond market is offering very attractive yields (3 – 4%). It may be prudent for such investors to also consider having enough in short-term bonds or cash to cover 6 – 12 months of their lifestyle spending.
Historically, periods of market downturns led to a strong recovery with markets reaching new highs. Time and patience weather these storms. If you would like to discuss your investment strategy, we welcome the opportunity to assist you.
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The Sanibel Captiva Trust Company is an independent trust company with more than $3.6 billion in assets under management that provides family office and wealth management services, including investment management, trust administration and financial counsel to high-net-worth individuals, families, businesses, foundations and endowments. Founded in 2001 as a state-chartered independent trust company, the firm is focused on wealth management services that are absolute-return oriented and performance driven. Each portfolio is separately managed and customized specifically to the client’s yield and cash-flow requirements. The Naples Trust Company and The Tampa Bay Trust Company are divisions of The Sanibel Captiva Trust Company. Offices in Sanibel-Captiva, Naples, Marco Island, Tampa, Belleair Bluffs and Tarpon Springs. www.sancaptrustco.com