“Every dad, if he takes time out of his busy life to reflect upon his fatherhood, can learn ways to become an even better dad.” Jack Baker

Good morning,

I hope everyone had a wonderful weekend and enjoyed father’s day! It’s an important day for those parents out there, to reflect on how they have managed to navigate through these wild times. It’s also an opportunity for us all to reflect on the impact our fathers had on our lives.

This type of reflection is always an important practice. Understanding the positive impact of reflection can prove to be an instrumental part of our lives. At its simplest, reflection is about careful thought, but the most useful reflection involves the conscious consideration and analysis of beliefs and actions for the purpose of learning. Reflection gives the brain an opportunity to pause amidst the chaos, untangle and sort through observations and experiences, consider multiple possible interpretations, and create meaning. This meaning becomes learning, which can then inform future mindsets and actions for our growth and development.

For me, being adopted, I find these holidays an excellent time to reflect and be thankful for decisions made by parents, as it’s certainly their wisdoms and endless support that has not only driven me further in life, but is a constant encourager to continuously attempt to be an improved father.

Incorporating reflective practice into your daily/weekly routine can be difficult, but despite the challenges to reflection the impact is clear and if we follow effective action with quiet reflection…..from the quiet reflection, will come even more effective action.

“My father gave me the greatest gift anyone could give another person, he believed in me.” Jim Valvano

And now, to the markets

All eyes were on the U.S. Federal Reserve this past week. And, it did not disappoint, at least with respect to the buzz generated within the investment community. The Fed, as it is often referred to, appears to be preparing for a shift in its approach to monetary policy. While there was some weakness in bonds and segments of the equity markets, the most notable action occurred in the currency markets. We explain more below.

This past week, the Fed provided an update on its economic and inflation projections as well as the anticipated path it foresees for interest rates and bond purchases. Investors had been accustomed to a Fed that had to this point exhibited substantial patience and resisted the temptation to alter its approach despite a domestic economy that has improved and pricing pressures that have surfaced. As a result, some investors were surprised by the new estimates and comments released this week that suggest policymakers are preparing for a transition away from ultra-accommodative monetary policy.

The Fed’s projection for economic growth for the year was revised higher, but its inflation forecast saw the biggest boost, with the estimate now expected to be slightly above its preferred target through the next few years. Moreover, Chairman Jerome Powell acknowledged that while they still view the uptick in inflation as temporary in nature, there is the possibility it could be higher and longer lasting than expected. He indicated that committee members have begun to talk about when to start reducing their monthly bond purchases which they have been using as another means of fostering favorable financial conditions. Many expect a formal announcement of such a plan later this summer.

Not surprisingly, investors zeroed in on the fact that an increasing number of Federal Reserve committee members moved up their estimated timeline for interest rate hikes. Of the 18 members, 11 expect at least two rate increases in 2023, while 7 see rates potentially beginning to move higher next year, up from 4 members just a few months ago.

The reaction in the markets was noteworthy, particularly amongst currencies. The U.S. dollar rose meaningfully relative to most currencies, putting more pressure on some commodities that had already been weaker of late. But the U.S. currency still has a ways to go to unwind the underperformance witnessed against many currencies since last year. While it has some wind at its sails for now, an improving economic backdrop outside of the U.S. should be more supportive of other currencies.

In the grand scheme of things, the developments this past week were not too surprising. The economic wounds that arose last year have been closing, and the pending shift in approach of the Federal Reserve, and other central banks for that matter, reflect a return to a more normal environment, which should come as a relief to many. Nevertheless, interest rate hikes over the next number of years, should they occur, increase the odds of entering an environment where access to credit becomes more difficult. Most major market declines have coincided with recessions, and most recessions have occurred when financial conditions become restrictive. Thankfully, we envision a very gradual transition in monetary policy, and don’t envision those kind of conditions arising any time soon.

As we head into the week, try to take some time for reflection and think about prioritizing it into your routine. I find that many people reflect through writing in a journal, but if that sounds terrible you can sit, walk, bike, write, talk or just merely spend time thinking….schedule time and start small and your reflections will enhance your understanding and lead to a more intentional direction.

“The quality of a father can be seen in the goals, dreams and aspirations he sets not only for himself, but for his family.” Reed Markham

Be well & enjoy the moments

Derek