The real world remains a much better place than Wall Street wants to admit. This isn’t helping stocks at the moment, but it is what matters long term. It might help Mr. Powell if he read Proverbs 17:28 before having another press conference: “Even fools are thought wise if they keep silent, and discerning if they hold their tongues.”
Our view that investors are better off in a traditional retirement plan than in a Roth was in the minority. Secure Act 2.0 should put an end to any doubt. However, the Roth is not without some benefits. Let’s take a look at the details and the drivers.
These bank failures are all very risky endeavors and not indicative of any problem in the normal banking system. It is even more irresponsible than usual for the financial media to be stoking fear: We are not in a financial crisis, but we can be by the end of this week if everyone sells everything and hides the cash under their mattress.
The big question is: Who expected inflation to just drop in a straight line? I doubt anyone did, but that doesn’t stop short-term traders from playing their games. Inflation has long stopped being the story for the market; The story is that the Fed raising rates will cause a recession. We believe that story is just wrong.
The market doesn’t know what to make of an optimistic Fed. So where does all this leave us? The confusion and mixed signals are really just reminders that the prudent way to make investment decisions is from the bottom-up. Markets often act strangely in the short term, but they tend to get it right over time. Powell’s optimism was the only thing that made sense last week.
