On Wednesday, the Federal Reserve announced no change to their benchmark interest rate, keeping rates at 5.25-5.50%. The Federal Reserve feels interest rates are still sufficiently restrictive to drive inflation lower with Jay Powell indicating a future rate hike would be ‘unlikely’ Federal Reserve: Interest rates will stay | AP News.
The status quo in rates was expected after the Federal Reserve’s preferred inflation measure, core PCE, rose 0.3% in March. The first quarter showed inflation rose 3.7% at an annualized rate, higher than expected. PCE inflation accelerates in March | msn.com
More Competition or Less Innovation: In April, the FTC announced a ban on noncompete agreements in the United States. Noncompete agreements typically prevent workers from switching jobs in geographic areas, professional fields, or joining specific competitors. The ban would not impact “senior executives” defined as people earning over $151,164 a year who are in a ‘policy-making position.’ The order does ban any new agreements and bans employers from recouping any training costs The FTC Voted to Ban Noncompetes for Everyone | msn.com. What I found interesting was the impact it may have on specific sectors, particularly healthcare, where between 37% and 45% of physicians are bound by noncompetes (What does the FTC noncompete ban mean for doctors? | inquirer.com). Arguments for the ban on noncompetes are additional worker rights and freedoms, higher wages with employees searching for higher pay, and more business formation and patents filed. Critics say it reduces the incentives for employers to invest in their employees and may curb innovation if employers shy away from investment. Small players may not be able to compete with larger firms in bidding wars. The ban would go into effect in 120 days but is being challenged already in court.
Bird Flu Questions: I have been selfishly following the avian flu annually to protect my growing flock. The recent observance of bird flu in dairy cows and milk is a new wrinkle and impacting more cows and milk than expected: Bird Flu Outbreak in Dairy Cows Raises Key Questions for Scientists | Bloomberg. Overall, the risk of the flu spreading to humans is low, but it brings into question how the United States’ food supply may be impacted. The FDA maintains the meat from infected cows is safe, but they are testing what that may look like at different cooking temperatures. The number one suggestion from the FDA is to only drink pasteurized milk.
Financial Planning/Investment Strategy Corner:
Millennial Wealth - Avocado Boast: While I don’t put much stock in the comparison of generations since I find it hard to compare someone in their 20s or 30s growing up in the 1960s or 1970s to someone today, facing different economic landscapes and circumstances. It’s always difficult to paint any generation with broad strokes using averages. With the concern around Millennials not accumulating wealth as fast as recent generations and some criticism of their disproportionate consumption of lattes and avocado toast, the Federal Reserve released some interesting data that the average wealth for US households under 40 rose 49% since 2019 (adjusted for inflation):
The recent wealth rise is due to the increase in housing wealth, financial assets, and declines in debt: Young Americans' wealth has soared since the pandemic | axios.com. The trend extends beyond the United States and Millennials, with The Economist Magazine pointing out that globally Gen Z is more educated, employed, and wealthy compared to other generations at the same point in their lives: Reasons to be cheerful about Generation Z | economist.com Generation Z is unprecedentedly rich | economist.com.
While good news, it’s important to consider what generations are doing with this wealth and where they are receiving advice. A recent survey suggests that 80% of Gen Z and Millennials turn to social media for advice (Where Do 80% Of Young Adults Get Financial Advice? | Forbes ). While some of that advice may be good and accurate, an individual's financial plan is specific to everyone and complex. Social media can offer good advice but searching the internet for advice has its pitfalls. You can always find the answer you are looking for but determining if it is correct, is another story. I know I’ve been on YouTube for hours trying to change the tire on my tractor (maybe even as recently as last week). A better approach is receiving more tailored, specific advice from a financial professional (I went to my local hardware store for tire help – they know me well). At RSWA, we are always happy to meet with anyone seeking financial advice, whether it is family members or friends.
Quick Hits
- A new study suggests empathy is on the rise in the United States: Do Americans have empathy? Research shows an increase in compassion | Vox
- If you have been doing any recent Spring yard cleanup, you may be coming across more pinecones this year. Here’s why: There are a lot of fallen pine cones in Maine right now | centralmaine.com
- This must be why my cat insists on getting on the counter: The Forgotten, Evolutionary Reason Cats Love Being So High Up | inverse.com
- I thought this story was amazing and goes to show us how vital physical infrastructure is to our digital lives: The invisible seafaring industry that keeps the internet afloat | theverge.com
- Staying social and drinking milk, tips from a 110-year-old: Man Offers Tips For Healthy Long Life | today.com
Quote: “Nothing so weakens government as persistent inflation.” – John Kenneth Galbraith
Thank you for reading RSWA Financial Advisor Insights! We welcome feedback, and please forward this to a friend! Be well, take care, and stay safe!
