Dear valued client,
Markets responded positively this week to the Federal Reserve raising interest rates by another 0.75 percentage points. We’ve seen the largest consecutive interest rate increases in several decades over the past month. The result will be twofold; first, a slowdown of the economy and consumer spending. This will help stabilize prices and help bring inflation under control. Second, both individuals (especially on mortgages and lines of credit) and companies (especially those over-leveraged) will have a more difficult time making loan payments and repaying debt. It’s precisely in economic situations such as these we see the importance of carrying as little debt as possible. I suspect we will see an increase in mortgage defaults and company bankruptcies in the upcoming months.
In tech news, the U.S. Congress approved a $280 billion dollar semiconductor bill that will incentivize more domestic production of semiconductors, which are key components of phones, computers, and military equipment. The bill also aims to counter China’s growing global economic influence. On the heels of COVID and supply chain issues, large economies are bringing more production and manufacturing of goods back to their shores.
Question for those with an option on the subject… do you think congressional members should be allowed to own individual stocks?
In the days leading up to the vote on the aforementioned bill, a prominent politician’s spouse bought roughly 5 million dollars worth of stock in a semiconductor company. This strikes me as being tantamount to insider trading. Perhaps there’s some nuance here I am unaware of, but I would very much like to know what you think.
I will be back on Canadian soil this evening. If you would like to sit down for a meeting in the upcoming weeks, please let me know.
“Simplicity is the ultimate sophistication.” – Leonardo da Vinci
Have a terrific weekend,
PW
