The Federal Reserve is responsible for trying to control inflation using several methods, including setting interest rates in the United States. Even though there have been 10 rate hikes in the last year and a half, most recently on Sept 20, 2023, Federal Reserve Chair Jerome Powell announced that the Fed was keeping interest rates level for now, but left the door open for more hikes down the road or potentially even keeping rates flat for the foreseeable future. So, what’s going on? ABC Lowcountry Live host Tom Crawford kicked off a lively discussion with Financial Advisor Jason Noble, CFP®, RICP®.

Jason said that according to data from the NASDAQ, the United States has “printed $13 trillion since the middle of 2021.” He said that that amount was pumped into the economy for COVID relief, for infrastructure, and for quantitative easing, which is when a central bank like the Fed purchases securities in an attempt to reduce interest rates. Jason said the $13 trillion estimate does not include money for financial aid to Ukraine.

While we are seeing data that inflation is pulling back in the U.S., Jason said we are also seeing economic headwinds coming out of China as their economy slows down, nearing depression level. In fact, for young people in China, unemployment is at an all-time high. While this may not directly impact the prices consumers see in the grocery store or at the pump in the United States right now, Jason said China’s economy does and may affect us in the future.

Financial advisors like Jason Noble try to pay close attention to global factors that can affect markets and therefore financial returns. Even if a portfolio only contains American stocks, certain companies may sell the majority of their products to China (or conversely manufacture most of their products there) and their stock price may be harmed by a Chinese recession.

The supply chain is also important. Supplies and materials from China are possibly more of a concern than supplies from other countries, like oil and steel from Russia, for instance, which has affected prices in countries around the world since their invasion of Ukraine, but indeed only represented 1% of steel imported into the United States according to Jason. But China is different. China’s GDP (gross domestic product) is second only to America’s. This development is definitely something to watch out for, and could end up affecting commodity prices, food prices, oil prices, you name it.

Higher interest rates also make it more expensive to purchase or refinance a home. Jason said it’s important to remember that home mortgage interest rates are approximately what they have been historically for the last 40 years or so, it’s just that we had gotten very spoiled by recent mortgage interest rates coming in at 2.5% and 3% in the last few years.

Additionally, in looking at the inflation rate from 2021 to now, Jason said a family living on an income of $100,000 in 2021 would need to make $118,000 to keep the exact same purchasing power today.

Tom Crawford asked Jason Noble about “the three p’s when it comes to holistic investment strategy.” Jason explained that the three p’s are the public market, private market and protected assets. Jason said that in the last 20 years since he’s been a financial advisor, you had to choose between growth or income when it came to investing. But the silver lining in today’s economy with the interest rate environment that we are in right now is that you don’t have to choose; you can split the middle and achieve growth plus income depending on your personal financial situation.