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Brad here. As we talk about inflation (and we will have more to say next week), the real question for us, as investors, is what we should do with our portfolios. No one is more qualified to answer that question than Pete Essele, who runs our Preferred Portfolio Services® Select asset management program. Here are his thoughts—have a great weekend!

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We’ve talked a lot about higher interest rates and what they mean for the market. But we haven’t really looked at what is driving those higher interest rates, which is inflation. Of course, you see the stats and the headlines, but as usual, there is very little context or explanation as to what those numbers mean. Today, I want to take a look at what inflation actually is.

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Brad here. Yesterday, I laid out why I am not concerned, in general, about what a yield curve inversion means for the economy, while still being very aware of the increasing risks. Today, Anu Gaggar is taking a more detailed look at what inversions have historically meant for the markets. Although she too sees rising risks, she is also less concerned in the short term—so let’s hope we are right!

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One of the outcomes from the recent Fed meeting, where the Fed decided to raise rates for the first time in years, was a clear plan to continue to raise rates over the next year. Fed Chair Jerome Powell added fuel to the fire yesterday when he said that the Fed was willing to raise rates even faster than the meeting notes suggested. The Fed is now clearly focused on bringing inflation back down, even if it means slowing down the economy.

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Last week was jam-packed with economic updates and reports that covered a variety of sectors. The February retail sales report was one of the more widely monitored updates, as it showed that consumer spending continued to grow during the month. But the pace of sales growth slowed compared to the start of the year. This will be a relatively quiet week, with only one major update scheduled.

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This week, we have been talking about interest rates and the Fed—and what that all likely means for our investments going forward. But behind those conversations is another more fundamental question: what should interest rates be? If there is some natural rate where interest rates should be, that could give us some guidance as to where they will end up. That is really what we should be looking for as we plan our portfolios over the long term.

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