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3/4% Rate Hike The Greatest In 28 Years. Will We Be Able To Avoid Recession?

  We just had a 3/4% rate hike, the biggest hike in 28 years. Will taming inflation ensure a recession? Right now there’s a multi-front war going on against inflation. Finally, after a lot of planning and discussion and debate, the troops have finally been engaged in battle. First and foremost, of course we know about the 75 basis point hike. The Fed funds rate is 1.5%. That’s just a fancy name for the short-term safe money interest rate and it is the basis on which all other interest rates are built upon. We’re however only halfway to the goal of 3% and we were as low as zero after the pandemic. In fact, by 2023, it’s going to go up to 3.75%. So, this party’s not over yet. This is affecting interest rates all along the yield curve, which is the fancy way of saying mortgage rates are going…

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Inflation: Just How Bad Is It?

  Inflation, just how bad is it? It seems that just about every headline in every media outlet is talking about inflation and there’s as many opinions about inflation as there are headlines. So, I thought I’d go through a quick summary of the various components of inflation with the idea of maybe improving our general understanding. We have this headline number of inflation. The most recent headline was *8.3%, which was slightly lower than the month before, but inflation is made up of bits. We’ve got fuel, we’ve got food, we’ve got housing, we’ve got pretty much everything else. We’ve got core inflation, which includes housing and everything else and we’ve got the fuel and food inflation. So this gets a little fun. Oil, as we know is $120 a barrel, a little bit over. The average price of a gallon of gasoline throughout the country is $5. Historically,…

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Here We Go Again!

  Well, here we go again. Morningstar market index, it’s down a year to date -17.7%. Are we in yet another bear market? Hello, my name’s Paul Carrol, CEO and founder of Avion Wealth, an elite wealth management firm here in South Texas. With the S&P 500 down over 16% and other indices looking even worse, what does this mean? Well, there’s a lot of pressure on all markets. Interest rate hikes are necessary to fight inflation. Inflation is at 8%, maybe higher. We have what’s called an inverted yield curve. It’s a strong leading indicator of recession. There’s a war in the Ukraine and it’s having severe impacts on the energy markets, which is further feeding inflation. And then we have corona lockdowns in China, which may not seem to be relevant, but they’re having a significant impact on supply chains over and above the regular transit challenges that…

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With The Fed About To Raise Rates, Where Do We Go From Here?

  With the Fed about to raise interest rates, where do we go from here? Hi, my name’s Paul Carroll. I’m the CEO and founder of Avion Wealth, an elite wealth management firm here in South Texas. Last week saw significant volatility in the equity markets and the Fed has told us this week to expect up to a 0.5% bump in interest rates. Are we seeing a correction? GDP contracted last quarter by 1.4%. The Fed’s quantitative easing is coming to a slow end, and we now have increased interest rates baked into the cake. Could any or all of this drive us into a recession? Higher interest rates, inflation, recession. This begins to sound like the stagflation of the 1970s. If so, it’s going to be a paired down version. That was pretty awful. What we have today is quite different. We have supply and labor shortages. This…

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Where Do Markets Go From Here?

Here’s an exercise you may find informative. Ask a couple friends what happened to the stock market in 2020. You’ll get a wide array of answers, but here’s an answer you’re unlikely to receive: “The S&P 500 rose 16.26% in 2020, an above average annual return and a good year of market performance by any standard.” Why shouldn’t we expect this answer? It likely has something to do with the sharp pandemic-induced 34% drop we saw at the beginning of 2020, which comes to mind quicker than the gains the index posted by the end of the year. Unfortunately, as human beings, our brains aren’t hardwired for good investing. Studies show that human beings find a 1% loss to be more painful than a 1% gain is enjoyable – this leads us to focus on potential losses (because they have a greater emotional impact on the human mind) more than we focus on potential…

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Climbing Interest Rates Threaten to Shred the A-Plan

  If you’re a United Airlines pilot, specifically an ex-Con and you know who you are, watching interest rates go up and the balance of your defined benefit pension drop, is somewhat startling. What are you to do? Hello, my name’s Paul Carroll, the CEO and founder of Avion Wealth, an elite wealth management firm. There’s a saying in the business, an airline gets the union they deserve, and during the financial crisis of 2008, the great relations that existed between Continental Airlines and their leadership team was about the only major airline to hold onto the lump sum for their employees. Gordon Bethune, Herb Kelleher and subsequently Greg Brenneman, they were the gold standard in airline management. Both Southwest and Continental survived that awful period better than anybody else. Now ex-Cons, as I said, you know who you are, their lump sum was frozen. But at least it existed….

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A Fantastic Jobs Report Adds Further Upward Momentum for Inflation. How to Protect Yourself.

  We’ve got a new jobs report and an inverted yield curve. How is that going to change things this year? Hi, my name’s Paul Carroll, the CEO and founder of Avion Wealth, an elite wealth management firm here in Texas. Yesterday’s jobs report announced a 3.6% unemployment rate. Now that’s remarkable in any time. In the United States, a large country, that’s just 6 million people unemployed. To put this in perspective, there are 11.3 million job openings in the country right now. What does that mean? That translates into what has proven to be a red hot job market, like nothing we’ve ever seen before. Now interestingly, there’s another almost 6 million people who are out of work, but not looking. And if you do the math, the unemployed, the out of work not looking, and the job openings match almost perfectly. The challenge is getting them back,…

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Fed to Investors: Just the Beginning

  The Federal Reserve has increased interest rates against the backdrop of war and recession risk. How’s this going to affect you? What should we do about this? The Fed has increased the rates one quarter percent. It’s the first of projected eight increases for a total increase estimated to be 2% of the rest of the year. This is against a backdrop of US mortgage rates that have topped 4%. Gas prices are above $4.00, oils above a hundred dollars. We’ve got supply chain and labor shortages. And of course, we got this war in the Ukraine. So there’s a lot of uncertainty in the environment. The challenge for the Fed is slowing inflation without tipping the economy into recession. Now, any economic historian will say, “If you go back 50 years or 70 years, the Fed typically doesn’t pull this off. They typically nip the inflation in the…

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Mother Russia An Outsized Threat?

  So Mother Russia has a big problem. How’s that going to affect you in the portfolio? Hello, my name’s Paul Carroll, the CEO and Founder of Avion Wealth, an elite wealth management firm here in Texas. President Putin has recognized two Eastern provinces as break away states, something I might add that the Ukraine doesn’t agree with. He’s painted himself into a corner domestically, and anybody who saw yesterday’s monologue is right to be very deeply disturbed. For the first time since he took over as the President of the nation, he appeared to be somewhat unhinged. Now, Europe has further compounded the problem with their aggressive turn from nuclear power over the last few years, especially after Japanese disaster. This happened before green alternatives existed. Not only have they ramped up the use of coal, but they’re extremely dependent on Russian natural gas. And despite that natural gas,…

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