There is so much data announced this week that it is hard to find a point to write an article with our client update video. Due to so much volatility in January, you may see multiple trades in your account.

These changes are due to our rules indicating modifications due to the market and economic changes. Occasionally I am asked, “are y’all watching the markets?”  Absolutely, we watch them all of the time, but we will follow our research and tested rules when making trades.

As I explained in the video, we believe there are two likely scenarios:

First, the Federal Reserve (Fed) has indicated that it will fight inflation hard in ’22. However, the economic growth is slowing, putting the Fed in a pickle. Their job is to both keep inflation low and maintain a stable economy. In this case, these are opposing challenges. Traditionally, the Fed tightens the money supply by raising interest rates to fight inflation. And they loosen the money supply by lowering interest rates to boost economic growth. Therefore, we believe they will try to thread this needle and not raise rates as much as the market predicts, which is the main reason the market has sold off in January.

The second possible scenario is that the Fed fights inflation hard and lets the economy and market flounder. If they do this, we predict a sharp market sell-off.

However, since the recording of the update, Fed Chairman Powell spoke, giving more guidance to economic expectations this year. Fourth-quarter 2021 GDP data was released, demonstrating far more robust economic growth late last year. A healthy economy traditionally leads to growing markets. Therefore, this gives the Fed more room to fight inflation. I believe this is good news; it helps the Fed out of their pickle at the moment, allowing them the freedom to do their job better. Remember why this happened. I understand if you are confused. Thousands of moving parts make up the economy, and each piece (somewhat) follows common sense. So, think about this problem in this way. During quarantine, a large percentage of our economy shut down. The US Fed and the Treasury flooded the economy with Trillions of dollars. Money in motion is always looking for something to buy, and this much money pushed the cost of everything up. Prices go up even further when combined with the supply chains around the world shutting down, causing a shortage of items to buy and services provided. These two disruptors alone are enough to cause our inflation problem. And therefore, we want the Fed to fight this and win.

The unwanted outcome could be market volatility, as we have seen in January. While we do not have a crystal ball, I can boldly predict that the markets will go up and down this year. Beyond that, I do not know, which is why we have rules-based models tested over decades of data. And we are confident they will do their job well.

So, what can you control? You can manage the economy in your household with excellence. We are here to help you. You can set goals, review your plans, and take the needed action to invest for the future or maintain your income today. There is no reason to fear but be excited. You have great resources, and our team is committed to helping you succeed. Please call your advisor and discuss your financial plan today.

God bless,


Investment Advisory Services offered through Sound Financial Strategies Group, LLC (SFSG), a Registered Investment Adviser. Certain representatives of SFSG are also Registered Representatives offering securities through APW Capital, Inc., Member FINRA/SIPC, 100 Enterprise Drive, Suite 504, Rockaway, NJ 07866 (800)637-3211. SFSG and APW Capital are separate and unrelated companies. The opinions expressed are those of Sound. The opinions referenced are as of the date of publication and are subject to change without notice. This information is not a recommendation to buy or sell a particular security or to invest in any particular sector. Past performance is not indicative of future results. Forward-looking statements are not guaranteed. Sound is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Sound's investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. SFS-22-02.