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Proprietary Data Insights Financial Pros Top Stock Searches Last Week
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Digital Dollars While it slipped mostly unnoticed, President Biden signed an executive order telling the government to look into a digital dollar. Jerome Powell and the Federal Reserve are already on the case. Digital dollars would be the equivalent of a cryptocurrency sponsored by the U.S. government. Proponents say it’s needed to take us into the future. It would also help the ‘underbanked’ – those with little or no formal relationship with a bank. This typically encompasses folks with less income that rely on payday lenders and check cashers. In the U.S. 6.5% of households are ‘unbanked’ and 18.7% are ‘underbanked.’ A digital dollar would give them an alternative to traditional banks. Additionally, a digital dollar could lower transaction costs and keep the U.S. dollar at the forefront of the world’s global currency. Opponents say the digital dollar would bring in more government intrusion since they would know everything about your digital dollars. It would also give the government more control over the allocation of financial capital throughout the economy. These concerns are valid and true. The problem is we can’t go without a digital dollar forever. Our world is moving forward and we along with it. Some of us can’t remember the last time we carried cash on us. The sea change is coming. We can either ride the wave or get swept out to sea. |
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Interest Rates |
Here Comes the Fed |
Key Data:
It’s the event we’ve all been waiting for. Unfortunately, we have to deal with March Madness as well. But let’s not spoil the mood in what’s sure to be a festive Fed meeting this week. What’s Happening The Federal Reserve’s Open Market Committee (FOMC) meets on Tuesday to start their two-day session that culminates in an interest rate decision on Wednesday at 2:00 p.m. EST followed by a statement. Markets are trying to figure out whether the Fed will raise interest rates by 0.25% or 0.50% this go around since the FOMC already indicated they would raise rates at this meeting. Why Are They Doing This? Inflation is out of control with prices for everything skyrocketing. Gas has nearly doubled over the past year and even your dentist probably charges more for the cleaning you don’t want to do in the first place. Central banks will raise interest rates to lower the demand for goods and services by increasing the cost to borrow. That incentives people to save more and invest less. Why Are We Here? As a bit of background, the Fed stepped into..well it…back in 2020 to backstop credit and debt markets as they spiraled out of control from lockdowns. During The Great Recession, the Fed took similar measures over a two year period. This time they said they’d hit the ground running in days. That created a bottom in stocks and bonds, sending them on a one-way trip higher until recently. At the same time, the government handed out enormous sums of money to taxpayers and businesses to keep them solvent until the economy recovered. Along with the stock market, the infusion of cash helped lift spending to levels that exceeded those before Covid hit. However, global supply chains never recovered. A shortage of workers, a backlog of orders, containers in the wrong spots, and a host of other issues created logjams at ports and warehouses. Even today, the port of L.A., which historically has no backlog, watches over more than 100 ships moored of its shore. The Bottom Line: Markets care deeply about Fed policy. Stocks prefer lower interest rates but will accept rate increases so long as they don’t snuff out economic growth. That’s the needle the Fed has to thread, which is being made all that more difficult by the war in Ukraine and the cluster that is the world’s supply chains. We can and should expect markets to be volatile after the announcement. But give things a few days if not a week or two to digest before coming to any conclusions about where stocks might be headed. |
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