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In Minneapolis, we have already had one blizzard in April, and more snow potentially is on the way as we endure the third snowiest year on record. As many people here wonder what April blizzards portend for flowers in May, at Bond&Devick we are wondering what bank closures and tightening credit standards portend for interest rates and the markets.

Most Federal Reserve rate hiking cycles tend to end when the economy tips into a recession or when something breaks and the Fed changes course to prevent further issues.  The economy does not seem to be currently in a recession, but something broke and in a big way.

The stock and bond markets started to cozy up to the idea that employment would begin to soften, and wages would moderate even more.  This would reduce inflationary pressures and allow the Federal Reserve to reduce interest rates at a faster pace than was previously expected.

Patti Page’s classic song may soon be coming back into vogue as the price of puppies (and most everything else continues to come down). According to Bloomberg, the average price of dogs in the UK fell by 28% last year and cats were down 32%. Apparently, animal shelters are filling up as more and more companies call their workers back into the office.

Last December our year-end email focused on supply chain issues, growing inflation, the dominance of growth stocks, and surging interest in cryptocurrency. We surmised growth stocks could have a challenging time in 2022 should interest rates rise rapidly and speculative investments could come under extreme pressure.

Before looking ahead, we think it instructive to review 2022 in all its horribleness.  We know it has been a difficult year for investors and here is some data to put things in perspective, all of which was taken from Morningstar, Inc.

Investors looking for inflation relief in the September CPI data report were sorely disappointed as the gauge of consumer prices rose to a 40-year high.  There are many indications that inflation may start to moderate including an increase in announced layoffs by large corporations, falling auto prices, falling housing prices, a buildup of inventory, and the supply chain continues to come

Inflation – like a tiresome house guest, has decided to stick around awhile

On Wednesday August 24^th, 2022, President Biden announced the Student Loan Debt Relief Plan, which was proposed during his campaign. Details of the plan are still being finalized, but the main piece is the forgiveness of some student loan debt. Although this may not affect you directly, it could pertain to your child or grandchild.

The Inflation Reduction Act of 2022 was recently signed into law. There are many parts of the new law, including prescription drug reform, tax reform, and increased funding for the Internal Revenue Service. The law also represents the largest investment into addressing climate change in United States history.