Three Minute Digest for December 15, 2022 | Affinity Capital

December 15, 2022

The Inflation / Recession Tightrope and a Word about Cryptocurrency

The Federal Open Markets Commission (FOMC) of the Federal Reserve completed their two-day December meeting yesterday and has raised the Federal Funds Interest Rate by 0.50% to put rates in a range of 4.25-4.50%, up from 0.00-0.25% at the start of March this year.

Interest rates continue to rise as global central banks aggressively tighten to fight inflation, while still attempting to avoid recession. Yesterday, the latest US Inflation Rate posted at 7.11%, compared to 7.75% last month and 6.81% last year. This is higher than the long-term average of 3.27%. The Dow Jones Industrial Average spiked to over seven hundred points to the upside after the announcement and experienced wide swings and briefly turning negative before ending the day with a 103-point gain.

The subsequent FOMC statement will be analyzed carefully for any clues as to whether this succession of aggressive rate hikes is ending. Today’s 0.50% hike is already a step in this direction, after 0.75% hikes for four successive past meetings in a row.

There are a wide variety of viewpoints concerning the interest rate versus recession debate. We believe we are already in a period of “stagflation” in which we experience both economic recession with a prolonged period of inflation going forward. A primary purpose of raising rates is to slow down the economy. The question is whether the Fed will exert too much pressure with monetary policy and push us into a deeper recession than anticipated. We feel that this debate will be settled in the first half of 2023, not in the second half.

The key going forward is the rate of decline for corporate earnings. The fourth quarter 2022 earnings announcement season which begins in January will set the tone for the markets in 2023.

The prolonged inversion of the bond market continues to trouble us. Another way to frame this is that the bond market is upside down. The 3 Mo. T-Bill currently pays 4.240% and the 30 Yr. T-Bond pays 3.573%. That is a difference of 0.667% which is a significant amount in this context. In a normal economic environment, the longer length security should pay more than the shorter length security.

Our response at Affinity Capital has been to maintain dividend paying, value-oriented equity positions and allocate a significant percentage of your portfolios in Treasury Inflation Protected Securities to yield double-digit income with lower volatility.

Cryptocurrency

Our viewpoint on cryptocurrency has been and continues to be one of avoidance. There is zero, we repeat zero, intrinsic value in these “investments.” It is not a “currency” nor is it classified as a traditional asset of any type. The U.S. IRS has classified it as property, but this is simply to have a means to tax it.

Can you make money? Sure – but it is what we refer to as “Vegas” money. For an average investor or gambler – luck be with you. There could certainly be strengthening regulation and adoption by central banks that could change the playing field, but we are far from that point. There are many funds based on cryptocurrencies but as our clients have seen, we have and will continue to avoid any temptation to invest.

Signals from the Fed: Inflation, Growth, and What Comes Next

August 22, 2025
It was a Fed-heavy week, with three major developments that matter for markets and the economy. FOMC minutes (July 29–30) — released Wednesday (Aug. 20). The minutes reinforced a data-dependent stance : participants saw continued progress on inflation but noted that risks aren’t one-way, citing pockets of labor-market cooling and the growth impact of tighter financial conditions. Policymakers emphasized flexibility and the need to see inflation moving durably toward 2% before declaring victory. For investors, the takeaway is that the bar for rapid policy shifts remains high, but the Committee is clearly keeping both sides of the mandate in view. Weekly balance sheet (H.4.1) — released Thursday (Aug. 21). The Fed’s weekly statement showed the usual moving pieces: securities holdings, reserve balances, and program usage. While week-to-week changes can be noisy, the release remains a useful pulse on system liquidity and the runoff of the Fed’s portfolio under quantitative tightening . Markets watch aggregate reserves and Treasury General Account flows because they can nudge front-end rates and funding conditions at the margin. Jackson Hole — Chair Powell’s Friday address. At the Kansas City Fed’s annual symposium, Chair Powell underscored that policy decisions will continue to be guided by incoming data . He highlighted the balance between sustaining expansion and finishing the job on inflation , noting tariff-related price pressures and supply-chain considerations among factors being monitored. The message: no preset path, but openness to adjust as evidence accumulates. Historically, Jackson Hole is more about long-term framework and risk management than near-term moves, and that tone held this year. What it means for the days ahead Near-term market drivers will be how inflation and labor data align with the Fed’s “proceed carefully” posture. • If inflation continues to edge lower while growth holds steady, the door stays open to gradual policy easing later this year. • If price pressures re-accelerate—or if hiring slows more sharply than expected—the Fed may extend its wait-and-see approach. Liquidity dynamics from the Fed’s balance sheet runoff will remain a background factor , but the central story is still inflation’s glide path and the durability of demand . Investors should expect choppy trading around key data releases , with markets pricing probabilities rather than certainties. As always, we welcome your questions and are here to support you . At the heart of everything we do is our commitment to “ Wealth Management for Life ”—providing enduring guidance for you and your family’s financial success.

Fed Moves and Market Trends | Affinity Capital

August 6, 2025
Markets entered the week with a boost of optimism, fueled by softer labor data and growing chatter that the Federal Reserve might be leaning toward a rate cut this fall. But that optimism didn’t last long . As the week unfolded, economic uncertainty returned to center stage: fresh concerns about tariffs, underwhelming corporate earnings in some sectors, and signs of consumer fatigue in key parts of the economy tempered the early enthusiasm.

Weekly Market Update: Stability Amid Data and Tariff Jitters | Affinity Capital

July 17, 2025
This week’s stock markets were marked by tight trading ranges, record-setting highs in tech, and a backdrop of macro uncertainty. The S&P 500 (through SPY), Nasdaq (QQQ), and Dow (DIA) eked out modest gains, shrugging off headline volatility tied to Fed independence concerns and escalating tariff threats.