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Chicago Office

350 N Orleans St,

Suite #9000n
Chicago, IL 60654

First Quarter 2022 - Observations & Review

March 21, 2022

 What has our attention in 2022

Since the start of the year the markets have retreated from 2021 highs.  The United States and most developed countries have lifted COVID protocols and mask mandates.  Companies are encouraging or instructing employees to return to the office.  After two years of COVID restrictions and disruptions, 2022 looks like a year when life has an opportunity to get back to normal.  Important to note, some of the lessons, changes and challenges will have ripple effects on the economy for years to come; with behavioral and cultural changes impacting some industries drastically.   

The labor market is tight, and talent is in high demand.  This is one of several factors, driving wage growth, inflation and disrupting the ability of some companies to deliver goods and services.  Given major changes in market valuations, inflation at 40-year highs[i] and the Federal Reserve signaling multiple increases in interest rates, now is an important time to review investment allocations, risk capacity, expectations, and needs.

Banks are sitting on an additional $2.6 trillion dollars[ii] in cash compared to pre pandemic levels.  The average American bank account has over 25% more cash in it today compared to January 2020.  With increases in energy prices hitting new highs and supply chain issues continuing, the New York Federal Reserve is forecasting inflation at or above 3.5%[iii] over the next 5-7 years.  This is almost twice the inflation rate experienced by the average consumer the last 14 years.  The consequences (real and potential) of this shift are extremely important for those on a fixed income, with high cash balances, fixed income investments such as Bonds, CDs and Annuities. 

Heading into Spring and Summer 2022 we are focusing on reviewing, updating, and advising our clients of adjustments they may need to make or should make as a result of this shift in inflation expectations.  If you have these or other concerns, please schedule time to meet soon. 

Kit Lancaster CFP, AWMA

Sterling Edge Financial LLC