July 2022 Newsletter

​Dear Friends,
Summer is definitely here (check your calendar or thermometer).  Please enjoy your long July 4th weekend – Happy Independence Day to you.  Hopefully you have plans to gather with ​friends and family and perhaps travel somewhere.  We wish you well staying cool, hydrated, and reapplying sunscreen often.

​Cybersecurity Checkup: Social Media AccountsIn order to ensure that you are fully protected online, it is smart to periodically check on some of your cybersecurity settings; especially review your social media privacy settings at least once a year. Often, new features are released or security settings change on these websites. Since they contain so much information about your life, you want to be sure you have the most up-to-date protection for these accounts.

​Here are some quick actions to take on your Facebook, Instagram, and Twitter accounts to keep yourself safe.

1. Check on two-factor authenticationAll of your social media profiles should be protected with two-factor authentication. This extra layer of security requires a one-time code that is sent to your phone before you can log into your account. This protects your account because even if your password is compromised, a hacker will not be able to access your account without the code.
Since social media accounts leave such a large digital footprint of our personal lives, it is critical that we enable this security feature everywhere. It is available on Facebook, Instagram, and Twitter. Go to your settings on each of the apps or websites to enable the extra layer of security.  Of course, this is a best practice for all your financial accounts’ websites as well.

2. Clean up your friends listReview the friends/followers on all your social media accounts each year. There may be people with whom you no longer want to share so much information. You may also notice duplicates of certain friends. This can indicate that one of the accounts is fraudulent. If you can easily tell which account is not truly your friend, report the account and delete it.
Hackers create fake profiles that appear to be real users and request friends and followers to initiate scams. For example, after you approve a fraudulent friend request, they may message you pretending they are in trouble and pushing you to send money. Or they may send malicious links. By combing through your friends list on a regular basis, you can eliminate the vulnerability of fake accounts.

3. Review third party appsDo you play any games on Facebook or have you linked other websites to your Facebook profile? Those are called third-party apps and they often have access to all or some of your Facebook data. If these app companies experience a breach, your Facebook account and data can be at risk. For this reason, it is important to review the apps and websites connected to your Facebook account and remove those you no longer use.
You can find your third-party apps by going to your Facebook settings and clicking the Apps button.
This social media checkup should only take you a few minutes but can help save you the hours of work and stress you will experience if you are hacked. So, schedule a social media checkup on your calendar every July!
 
Market Review
By now, you know that the U.S. Federal Reserve Board raised the so-called Fed Funds rate by three quarters of a percent—the largest increase since 1994.  You may also have heard that the size of the increase took many by surprise— including economists, pundits, journalists, and professional investors.  The news was one of the contributing factors that drove the markets, already teetering on the edge, into bear market territory—defined as a 20% drop from previous highs.

​The stated reason for the rate increase is to squeeze inflation out of the economy.  The logic is somewhat complicated, but the simple explanation is that inflation occurs when too much money chases too few goods.  Raising rates will make it more expensive to borrow, diminishing purchasing power on credit, which could (eventually) result in less borrowing, which could (eventually) slow down consumer spending.

But of course, consumer spending is a huge component of economic growth, so less spending will slow down the entire economy—at a time when it has already recorded a full quarter of negative growth.  By making borrowing more expensive, the central bank is also reining in corporate spending, which is another contributor to economic growth.  In fact, some economists believe that the economy was running ‘hot’ for the past decade, because companies could fund their operations with cheap money, and unprofitable companies could stay afloat because they could always borrow enough to get by.  The almost-free money allowed ‘distressed’ companies to rack up $49 billion in obligations that might need to be structured or face default.

​If you look at the bigger picture, the American economy has experienced something quite extraordinary: more than four decades of falling interest rates, until they finally fell to zero (short term) or near zero (longer-term) and had no more room to fall.  The Fed action has built on a reversal of that trend, sending mortgage rates to their highest level in nearly 14 years. 

​If you want to second-guess the Fed economists with their Ph.Ds., you might wonder whether curbing inflation is worth the collateral damage of negative economic growth, diminished consumer spending and reeling investment markets where confidence in the future is shaken.  Their answer is likely to be that sooner or later they had to take away the punch bowl that led to the economic equivalent of drunken excesses—the stock market boom, meme stocks, special purpose acquisition companies, soaring housing prices, the alarming rise in the cost of living.  They might have been gentler (or quicker) about it, but we all know that economic booms eventually lead to busts, which weed out unprofitable or poorly run companies and ultimately deliver a healthier economy and, for investors, provide opportunities to buy stocks at a discount.  Conversely, we know that market declines do not last forever (we won’t go to zero and “lose” everything) and will eventually rebound to higher highs.

​The Fed has challenged all of us, whether we run companies or manage our monthly budgets, to endure a painful transition that was probably inevitable, and take our medicine all at once rather than gradually over a longer period of time.  Yes, the medicine tastes terrible right now.  Let’s hope it provides the cure that the U.S. central bank is hoping for, and that this will lead us into the next economic expansion and a new bull market.

Final thoughts
Hopefully you have or will be making plans for safe travel this summer.  Take care, be well, enjoy yourself, and don’t forget the sunscreen.
As always, thank you for the trust and confidence you place in us; it is something we never take for granted and sincerely appreciate. Please do not hesitate to reach out whenever you have questions, concerns or whenever we may be of service to you. 

Sincerely,
Joe Downs, CFP® & John Cunningham, III, CFP®