As interest rates have risen to multi-decade highs, one of the implications that has received less attention is the strengthening U.S. dollar. The dollar affects all aspects of financial markets, the economy, and everyday life. Its value impacts the cost of imported goods, foreign travel, the revenues of U.S. businesses that operate around the world, and portfolios with international assets. In addition, the dollar is affected by the outlook on U.S. economic growth, interest rates, and concerns around the national debt. In other words, many factors impacting global financial markets are reflected in the dollar.
The third quarter was mixed for investors with two major drivers impacting portfolios. On the one hand, interest rates rose to 20-year highs, while on the other hand, exceptional corporate earnings continued to support stocks. Amid these major trends, oil prices climbed back above $100 per barrel, the Fed raised rates for the first time in three years, and concerns over AI grew as November’s midterm election approaches.
The housing market is important both on a personal level as well as for the broader economy and financial system. For many households, owning a home is an accomplishment that requires years of planning and saving, representing their largest asset, most significant monthly expense, and main source of debt. The housing market is also a large part of the overall economy, accounting for between 15% and 18% of the country’s economic activity.1 When combined with the overall wealth effect of the housing market, these factors can impact consumer sentiment, household balance sheets, and the pace of overall economic growth.
Janet Yellen, the former Federal Reserve Chair, often said that "monetary policy is not a panacea."1 Just as there is no cure for the common cold, except to let it run its course and address the symptoms, the Fed’s tools often cannot fix the underlying issues in the economy. In theory, monetary policy is meant to help ease these challenges, especially when it comes to the job market and inflation. In practice, however, the Fed does not control the economy directly, but instead responds to the economic environment.
Nelson Mandela famously said that “education is the most powerful weapon which you can use to change the world.” For many families, investing in a child’s education is a central financial planning goal, but the cost of doing so has grown rapidly. For this reason, grandparents often like the idea of helping fund a portion of their grandchildren’s education, especially because it creates a legacy that lasts longer than traditional gifts.
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