The third quarter was characterized by volatility as the stock and bond markets fell in tandem. Inflation, while beginning to cool, continued to vex the Federal Reserve, and bond yields rose, threatening to choke off growth in the global economy.

Inflation Begins to Tame

As the Federal Reserve continued its interest rate hiking campaign, headline inflation numbers in the United States began to flirt with the idea of coming into policymakers’ target range, which is around 2%. As a result, the Fed has halted raising rates for the time being. This is a welcome change as jobs growth is cooling and consumers tighten their belts.

Where Can You Hide When Bonds Aren’t Helping?

In a world of rising interest rates and higher-than-average inflation, the relationship between stock and bond returns has changed. As the chart below demonstrates, in the two decades after 1999, the correlation between stock and bond returns in the U.S. was generally negative, meaning when equities were moving in a given direction, bonds were doing something else. Investors would diversify their portfolios with both in order to reduce risk. In the last couple of years, however, the dynamics have shifted. Correlations have risen substantially, a direct result of rising interest rates. Bonds are no longer the ballast they used to be. This may not be the case further into the future, but it warrants some thought about asset allocation in the near-term.

What does an investor do when the traditional stock market hedge isn’t working? We will be focusing on this topic in our upcoming meetings. As always, your individual circumstances determine how you should be allocated.

With you for the long haul,

Carter Ellis, CFP®

Founder

Disclosures:

 Past performance is no guarantee of future success. This material is for informational use only and should not be considered investment advice.

 The opinions expressed are those of Guardian Wealth Advisors, LLC. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward looking statements cannot be guaranteed. Investing involves risk. Principal loss is possible.

 Investment advisory services offered though Guardian Wealth Advisors, LLC D/B/A Valley Peak Financial. Guardian Wealth Advisors, LLC ("GWA") is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about GWA's investment advisory services can be found in its Form ADV Part 2, which is available upon request. GWA-22-35