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In early April, after an all-time low on March 23, 2020, the S&P hit 4,000 for the first time in history. What a difference a year has made! Last month, I reflected on the one-year mark since the pandemic “lockdown” and the resulting market lows, and thankfully, we’re seeing continued strong signs of recovery. Although we’re optimistic about widespread vaccine availability and the economic growth anticipated with a full reopening, we’ll always find a new worry  – especially with the constant news cycle!

You’ve probably been hearing chatter in the news about inflation worries due to a sharp rise in commodity prices and the mounting federal deficit from recent and proposed spending in support of the economic recovery. Inflation typically leads to higher interest rates and many of us immediately think of the 1970’s and 1980’s, which is by far the worst-case scenario. To help provide some perspective and insight into the connection between inflation and interest rates and how it could affect your financial plan, I’ve compiled some helpful resources.

One of our feature articles this month, “The Fed and the Fuss, Demystified,” is an infographic on monetary policy and explains why the Federal Reserve adjusts interest rates. Although we’re hearing some concern about inflation, the Fed has pledged to keep interest rates low as recovery from the economic fallout of the COVID-19 will be a factor well beyond 2021. Many thought leaders believe that substantial inflation is also unlikely, including Raymond James’ Chief Economist, Scott Brown, as he discussed in his recent article, “It’s Unlikely We’ll See a Substantial Increase in Inflation.”

I’m also sharing this video, “The Ripple Effect of Interest Rates,” that highlights how small adjustments up or down not only have an effect on the economy, but on your financial plan.

 Although we’ve been accustomed to relatively low interest rates (compared to the 70’s and 80’s), for those borrowing money, it’s welcome, but careful income planning is important for those nearing retirement. Once the Fed’s goals for the economy are met, interest rates might start to rise. However, if you are approaching retirement in this low interest rate environment, it’s important to discuss strategies for your financial plan. We pride ourselves on our ability to help our clients maximize their investments to create stable, long-term income in retirement. I’ll leave you with one last optimistic article to help provide further insight, “Rate Changes Don’t Have to Derail Your Retirement Plans.”

 Whether retirement is decades away or just around the corner, if you haven’t met with us recently, now’s the time to make sure your financial plan continues to meet your needs. Please don’t hesitate to call our office or schedule an appointment with me online.

Take care and stay well!

Todd M. Wike, CFP®
Managing Partner, Potomac Financial Group
2021 RJFS Chairman’s Council Member*

The information contained in this material does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Todd Wike and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. Raymond James is not affiliated with and does not endorse the services or opinions of the various podcasts or applications discussed in this material. Chairman’s Council Membership is based on prior fiscal year production. Re-qualification is required annually.