Latest / Financial Survival Network / The Fed Report - Will Inflation Reach Its Target Rate? --- Matthew Johnson #5971

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The Fed Report - Will Inflation Reach Its Target Rate? --- Matthew Johnson #5971 · Financial Survival Network

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  Today's generation doesn't even know what inflation is compared to what we know inflation to
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  be from the eighties and nineties, and we don't want to have repeat of
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  that, of course. But the reality is is that I am very pleased
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  to see what they're doing with these rate pauses because I think that the job
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  is over. I don't think that they need to continue to raise rates on
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  us. You are listening to Carrie Lutz's Financial Survival Network, where you get
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  valuable information you just can't find anywhere else to thrive in today's trying times.
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  You need the Financial Survival Network now more than ever. Go to Financial Survivalnetwork
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  dot com and get your free newsletter and gift. Financial Survival Network now more
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  than ever, and welcome. You are listening to and watching the Financial Survival
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  Network. I'm your host, Carrie Letz. It's twelve thirteen, twenty three,
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  so we get the PPI numbers out, inflation is out, everything looking
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  good. What's the FED gonna do? Matthew Johnson with us now from Johnson
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  Wealth and Income Management, and well you find him at Johnson WIM dot com
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  if you got any questions for him or myself kl at Carrie lets dot com
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  is the email address. So, Matthews, great to have you back on.
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  What are you making here of the latest numbers, CPI, PPI,
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  personal consumption expenditures, all of that good stuff. What do you think.
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  Well, it's great to be back on the program. Thanks for having me
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  again, Carrie. There is just a lot of information to kind of unpack
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  over the course the last couple of weeks. So I guess we'll begin with
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  the latest piece of information, which is the Feds have decided not to go
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  ahead and raise interest rates in the month of December. Now, this is
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  this is good news. This is good news for us because the reality is
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  is we've gone through twenty four months worth roller coaster rides up and down,
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  watching the economy kind of go back and forth, shrink and then grow maybe
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  a little bit, and then back again. And we know that as the
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  Federal Reserve raises interest rates. Yeah, the main motivation is to bring inflation
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  down, which it's definitely worked. But the reality is is that it makes
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  growth really really hard for corporations, and it makes it hard just to grow
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  the economy in general. So the fact that they have taken and not paused
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  and raised interest rates not twice, but now three times. The general consensus
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  carry is really that this is now signaling the official pause, though I don't
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  think we're ever going to hear them say that for a very long time.
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  Their goal and their expectation is to try to keep a psychological lid on this
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  economy, and so they're not going to come out. They're not going to
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  be talking about rate cuts, not yet anyway, that's going to be a
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  while. That's probably going to be in the middle of next year, I'm
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  guessing. But good news is those interest rates aren't coming up. The second
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  thing that I think we can look at that is a good indicator that is
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  kind of reinforcing the decision of the Feds not to raise interest rate is the
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  personal consumption. What we're seeing is what we all really already know, and
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  that is that American families are not going out and buying big ticket items like
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  they used to. What they're doing is the majority of their household income is
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  really going to pay the utility bills. It's to buy the groceries and the
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  gasoline. And so we see that if the person consumption is kind of starting
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  to kind of dim just a little bit on those big ticket items. We
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  know that the Federal Reserve knows that what they've been doing raising interest rates is
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  actually helping CPI. CPI came down that was pretty broadly expected. Core inflation
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  at four cpis and three point one percent going in the right direction. Here's
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  a big question. Are they going to get down to the two percent like
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  they want? And the reality is I don't think so. And as I've
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  contended with many of my clients across many different platforms, I don't think that
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  they need to hit two percent for us to be comfortable at the rate of
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  inflation as Americans. You and I have discussed this in the past. You
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  know, today's generation doesn't even know what inflation is compared to what we know
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  inflation to be from the eighties and nineties, and we don't want to have
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  repeated that, of course. But the reality is is that I am very
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  pleased to see what they're doing with these rate lauses because I think that the
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  job is over. I don't think that they need to continue to raise rates
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  on us. So you think the rate raising is over? So happy days
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  are here again? Huh? Well again, They're going to keep a very
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  stern set of language that's hopefully keeping that psychological it. As I said,
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  on the market. You know, the thing that I think is going to
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  be a bit of a moving target for them is if we see how the
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  stock market is behaving right now. In fact, you know, September was
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  a bad month for the stock market. October was a dumpster fire, and
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  then all of a sudden you look at November and November things have completely changed.
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  Right. It's like the market chain to life. And today the stock
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  market is up and yet again on the news of no rate increase. So
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  now the Feds are going to be dealing with a different kind of psychology.
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  And this is what we call the wealth effect. So even though the majority
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  of household income in America today is now being focused more so on the actual
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  necessities of life, when individuals are starting to see their four to one k's
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  come back, they're starting to see their I ra's and their post tax investments
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  starting to come back, this is going to create a bit of a psychological
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  permission slip for Americans to say, Okay, well maybe we are out of
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  the woods, maybe we're getting back into growth, and I can feel good
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  about maybe taking some of my money out of my account and spending it,
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  and so that's obviously not what the Feds want. They want to continue to
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  see things shrink. But they're going to be contending with that wealth effect.
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  So I think in many respects, they're also going to be watching the market
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  very very closely because they know how emotionally connected as Americans we are to our
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  investments and do how much we've saved. Okay, so what do you do
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  now? Do you hop back in the market now that it's had this big
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  advance or do you play it safe? Well, it's interesting that you say
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  that because I've never been as a fiduciar area. I've never been a big
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  advocate of making wholesale moves in and out of the market. I'm really more
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  or less an advocate of being well diversified and making certain that you can take
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  advantage of the down times. And we do that by keeping very very close
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  eye on the fundamentals, which is Okay, I want to be diversified,
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  cross to various different asset classes. I want to make certain first in foremost
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  that I've got some safe money. I've got some money that's in fixed income,
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  I've got some money that's in some equities, and some real estate,
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  some precious metals. I want to have that diversification because I don't know from
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  day to day, month to month, a year to year which asset class
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  is going to be the best performer. But I really strongly encourage people to
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  take a look at their investments and make certain at the end of the day
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  that they are producing at least a good four percent or better in dividends.
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  And the reason they say that is, this is foolhardy to believe that if
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  let's say you've got money in the stock market, the stock market's always going
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  to perform. We know better than that. So there's going to be times
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  where the market isn't performing. So what if you're retired, Well, if
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  you're retired, you need income. You want to be selling those shares at
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  a loss to get that income. And the answer is obviously know, Well,
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  what if your portfolio is producing say four percent, five percent, six
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  percent dividends, which by the way, is doable. Now you've got income
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  to spend. But what if you're on the opposite end of that teeter totter.
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  What if you're not yet retired, You're not even closer retirement, You're
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  still in the accumulation stage. Well, the reality is is that you know,
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  many workers today they have access to retirement programs like four one ks four
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  or three b's and that sort of thing. But what if what if the
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  personal learning that you've invested is producing that four percent, five percent, six
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  percent, and you're using those dividend dollars to help continue the dollar cost averaging
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  story while the market is down, and here's a physical we all know,
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  it's almost as if we pop out of the wound we've been told, we've
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  already had it installed in our minds. We buy low, we sell high
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  right, And the reality is is that if we're not producing income off from
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  the assets that we own or not, doesn't mean we have to be taking
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  it. But if we're not producing the income, then we're not able to
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  only take advantage of the beautiful gifts that things like this situation with the FEDS
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  raising in restraints awards us. And so we want to be able to continue
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  to buy and stay diversified. We want to be able to make certain we're
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  getting income. We want to make certain we're paying attention to the distribution stage
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  of our life if we're in that and purposefully investing for that, if we're
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  not if you're still in the accumulation stage of your life. Let's say you're
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  forty five or fifty to fifty five years of age, and you still have
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  five, ten, fifteen years before you get to retirement. Stop playing it's
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  safe. Stop playing it safe, play it smart, and be aggressive because
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  the market always tends to come back. We know that, we just don't
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  know how long it'll take, and so we need to be absolutely sure to
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  be managing our investments. Things like this is going to happen in the future.
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  The Feds are going to make decisions in the future. We know that
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  it's going to affect us. Congress is going to be a bunch of boneheads
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  to continue to make really bad decisions from time to time, and it's going
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  to affect the market. So we've got to be prepared for that and be
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  agile enough within our portfolio to take advantage of it. All right, I
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  guess I guess that'll have to do. So you're better off being prepared than
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  being scared, That's correct. All right? Hey, well, thanks for
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  clearing that. Is clearing us up for that when we have this discussion next
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  December, where do you think things are going to be here? Matthew.
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  I think things that are things are really going to be elevated by December of
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  twenty twenty four. That's my expectation. We've gone through the Ringer in the
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  last three years, and I do expect good things. I think that we
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  just have to make certain that our optimism isn't clouding our judgment and we're making
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  rash decisions when we're supposed to just be taking a very moderate approach and doing
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  what we are supposed to do and not being swayed with the winds of Wall
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  Street or with the verious different headlines we see. We just continue to keep
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  our hands to that flow, be steady, be investing smartly, and making
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  certain that you've always got base is covered. So what kind of returns you
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  think we should be shooting for in this type of market. Well, that's
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  a great question, because really when you when you read the headlines, you
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  know everyone is pointing towards Look at the S and P. It's up twenty
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  percent. Well, don't mistake in that is twenty percent growth, because that's
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  not twenty percent growth, that's recovery. We look at where the S and
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  P is today compared to where it was at the end of twenty twenty,
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  we know that we're actually still below that high. By the end of twenty
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  twenty four, I would like to see that we're going to be anywhere between
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  eight to ten percent, maybe even twelve percent higher as an average in the
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  S and P. I think that that's very possible if the FEDS don't throw
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  us into a recession. Is that possible, Well, it is very possible,
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  but it really depends upon how long they choose to keep these interest rates
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  elevated. Carrot, Do you think we're in a recession now or we're kind
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  of on the cusp or on the edge? I believe we're on the ed.
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  I believe we're on the edge. I know that back in July I
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  was extremely nervous that they were being so very dogmatic that they were going to
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  push us to the edge of the cliff, and man, I could look
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  over the edge and see the bottom from where I was standing. But I
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  don't think that we're there yet. I know, depending upon the data that
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  you look at, some could argue that we already are in a recession,
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  and in some sectors of the economy, Carrie, we really are. But
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  as a general whole, I don't believe that we are all right. Well,
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  we won't get into China and it's effect on the world, what's happening
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  there. I think we'll just leave it here as an upbeat end of the
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  year message from Johnson Wealth and Income to all of you out there. Matthew,
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  just tell us where do we find you again? Where's the best?
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  Absolutely they can go to the website johnsonwim dot com, where they can go
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  to my YouTube channel, The Capitalized Life, and either which way reach out
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  to me. I'll be more than happy to excellent. Hey, got a
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  question for Matthew or myself, you can only send me an email kl at
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  Carrie LUTs dot com. Link is in the show notes to this interview on
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  our site Financial Survival Network dot com. While you're there, sign up for
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  your free newsletter. Matthew. Hey, best wishes to you and yours for
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  the holiday season and for the coming year, and we'll talk to you in
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  twenty twenty four. Sounds great. Thanks for listening to Carrie Letz's Financial Survival
• 13:30
  Network your solution to today's trying times. For the latest, go to Financial
• 13:35
  Survivalnetwork dot com. Financial Survival Network now more than ever