February 2023
401(k) Allocation

There are trades.

By: Lynda Elley

We are back to fully invested. With inflation falling to 6.5%, the Federal Reserve felt comfortable decelerating the pace of interest rate increases with their first meeting of 2023. The short-term lending rate now stands at 4.5-4.75% with the latest increase of .25%. Remember that this is the rate that affects our money market and CD rates and indirectly will impact the mortgage rates. The pace of interest rate increases in 2022 was unprecedented and resulted in the volatility we saw last year. With the latest and smaller increase, the Federal Reserve does seem to signal a change in the interest rate policy, and this has lifted all markets.

What we see now is a shift in the focus from inflation on goods and services to the jobs numbers. With over 500,000 jobs created last month and an unemployment rate now at 3.4% - the lowest since 1969! – a tight labor market generally means higher wages to attract workers. As a result, will the Federal Reserve still feel compelled to keep raising rates beyond what the market expects? That could damage this fragile recovery in stocks.

Either way, we will keep our eye on the trends and revise your allocation for your 401K accordingly! This month you will see an increase in the return to “normal” bond investments rather than cash, and the addition of international and some small company stocks.

As always, if you need assistance with your 401K rebalance, do not hesitate to contact us and we will be happy to help you. Remember to re-set both your current investments and future contributions!

If you have questions, please contact us.

MARKET UPDATE
FINANCIAL PLANNING
FRAUD ALERT

To download the February 2023 Newsletter: CLICK HERE

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