Have you ever played the game Jenga? Stacking the pieces higher and higher until the whole stack gives in and falls?
This is what is happening in our financial markets and economy with the Federal Reserve and U.S Government. They are continuing to stack up the chips against a positive outcome for us as consumers and investors in the near future and at some point will cause a problem in the system. Recession looks inevitable and according to many, it has already begun.
The fastest increase in interest rates in 40 years by the Fed is beginning to show its teeth as we see banks struggling. Silicon Valley Bank and First Republic already have gone through the cycle of being taken over and PacWest is struggling today to hold on. Credit Suisse went through it on the international front and things are fraying at the edges in the banking world. Commercial real estate is struggling and there is $1.5 Trillion in refinancing due in the next 2 years which is going to be a major headache. Many will not be able to refinance at higher rates and lower valuations which then have bank-owned properties rising quickly and we all know that is not good!
The current debate on the debt ceiling in Washington is another piece on the pile and is avoidable but they do not care about the economy or the people who have money invested for retirement. They did this in 2008 and I will never forget the split screen of Congress voting to save the economy or let it sink and they just let it collapse for the sake of blaming the other party. The people we have elected have lost touch with the people they are supposed to serve and are playing a big game of Jenga with our financial futures! The whole thing will be settled at the end of the day as far as the budget is concerned however the collateral damage of any delays and the fear it creates can have serious repercussions in world markets.
Staying cautious and protecting yourself over the next 6-12 months from recessionary concerns is a prudent course of action for us all until this storm recedes and the picture clears up!