Investing in Kindness

Here at Vantage, we believe in Investing in Kindness. We talk a lot about serving our clients and serving each other, but we want to take our company values of integrity and teamwork beyond that and ask ourselves, how else can we give back? Our team took the afternoon off on Tuesday, November 30th to volunteer our time at Feed my Starving Children to pack meals for kids living in poverty around the world. Our shift accomplished boxing 27,432 package meals and fed 75 kids for a year! We had so much fun throughout the packing process and felt grateful to have the opportunity to give back as a team!

Series I Savings Bond

Market Minute

December 2021 – Scott Rosenquist, CFA®

Investors continue to search for yield as interest rates remain low and inflation remains high. One place to look is directly from the U.S. Treasury with the Series I Savings bond. The I bond is a savings bond issued by the U.S. Treasury that offers inflation protection. Investors have to purchase I bonds from the U.S. Treasury since they are not marketable securities and do not trade like other bonds issued by the Treasury. The interest rate on an I bond is adjusted twice a year (May and November) based on the Consumer Price Index (CPI). The rate announced last month was 7.12% and applies to bonds bought between November of this year through April 2022. This is attractive relative to other savings alternatives from banks such as certificates of deposit and savings accounts.

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The Fed & Inflation

Market Memo

November 2021 – Dan Zalipski, CFA®

Seems like everywhere you look the prices of goods and services continues to creep higher. The latest Government report regarding inflation showed a 6.2% jump in consumer prices year-over-year, the most since December of 1990.  There is evidence that most of the inflation we see today is related to the unusual supply shocks and strong demand associated with the economic restart coming out of the pandemic.  Due to the unique nature of the inflation, the ongoing debate throughout the year has focused on how long the current bout of inflation may last, and what that implies for the monetary policy coming out of the Federal Reserve. 

The Fed believes inflation will be transitory.  In other words, once the supply chain issues are resolved, the rate of inflation should decline back towards its longer-term average (between 2-3%).  There has been evidence of this in certain areas.  Some commodities such as lumber and iron ore, saw their prices more than double in the first half of the year followed by a dramatic selloff coming into the second half of 2021.  As of this writing, both are trading lower than where they began the year.  Still, other areas of our economy feeling inflation pressures are less likely to be transitory, such as wages and housing. 

In the past, the Fed would preemptively hike interest rates to tamp down on inflation before it had a chance to set in.  Departing from that standard response, last year the Fed signaled that it would tolerate higher inflation relative to past periods, in exchange focusing on full employment.  Raising rates too soon runs the risk of cutting the economic recovery short.  On the other hand, waiting too long runs the risk of inflation climbing higher than expected, requiring a more aggressive response from the Fed, potentially in the form of rapidly rising interest rates. 

The Fed has stated that they believe the first rate hike will occur in 2023.  Should these monthly inflation reports continue to run hotter than expected, the Fed will likely have to act sooner in raising rates or risk letting inflation get out of control.  In the past, the market has been able to absorb rate hikes that are slow and predictable.  On the other hand, rapidly rising rates have the potential to create substantial volatility in both the stock and bond market.  The next monthly report on inflation will be released just days before the Fed is set to meet to discuss policy.  Investors all but expect rates to increase, but the timing and pace will be critical to determining the potential impacts on the markets.

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