Economic Soft Landings & Email Tips

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Economic Soft Landings & Email Tips

We may not be in for a soft landing economically. You have probably noticed interest rates have started to settle down a bit. Mortgage Rates have been bobbing around in the mid-six percent range and the 10-year government bond is hanging out around 3.5%. The Fed has also recently signaled that a .25% hike is more likely in their next meeting. This has some economists declaring that the Fed is defeating inflation and is in the process of engineering a soft landing. The idea behind a soft landing is that the Fed raises rates to such an extent that it slows inflation down to their 2% target, and that in the process it does not cause a recession. It is  supposed to be a manageable slow down that is then followed by rates coming back down and growth resuming. That is the ideal scenario for a soft landing. I’m not convinced that a soft landing is in the cards. Here are a few reasons why.

After increasing the money supply at unprecedented levels during Covid, recent money supply growth has been non-existent. Milton Friedman was a famous free-market economist in the previous century who championed the idea that inflation was first a foremost a money supply problem. So if the money supply is not currently growing, that’s good news for inflation once these excess savings begin to burn out in the system. We’re not there yet – but that savings depletion could happen in 2023. This could lead to a reduction in inflation but also a cratering of demand, leading to a hard landing and not a soft one.

Certain economic numbers are starting to point toward contractions. Last week we got the retail sales numbers for December, and it wasn’t good. November was also revised downward. Not only that, but leading indicators like the Purchasing Manufacturers index was in contraction territory for December. This is also reflected in the industrial production numbers that also came out last week. Producers are starting to make less stuff because consumers are demanding less stuff. Add these important numbers up and there seems to be at least a pause from producers and from consumers if not the beginning of an overall slowdown.  Anecdotally, some of the goods makers and retailers we work with at the bank have definitely seen things slow down. And much of the spending we saw in the 4th quarter was not goods-related but service-related spending: think hotels, restaurants and vacation spending. I talked to the owner of a condo in Florida recently, and after being booked solid for the last couple of years he commented that he only had one booking for the summer of 2023. In my opinion, consumers’ spending binge with all the new money that came their way is starting to run out.

The Fed doesn’t have a great track record of soft landings. Don’t get me wrong, they are incredibly smart people that are well intentioned. But it is incredibly hard to know what the economy is doing in real time. And it is even harder to find that perfect set of interest rates that will cool the economy down without slowing it down too hard. Not to mention that even though the Fed has a tremendous impact on interest rates, they cannot control all of them precisely. Market forces can sometimes frustrate or accelerate the plans of the Fed. Right now, the bond market is optimistic that Fed can engineer a softish landing. I hope it’s right, but I lean toward that not being the case. If history is any guide, the Fed often goes too far in both directions.

Core Inflation has continued to be stubborn. Although we recently got encouraging numbers on overall inflation, some of the core and less volatile elements are still going up. The unemployment rate also has not gone up, and until it does I think inflation will get stuck around the 4-5% range and be stubborn to go much lower without additional interest rate increases coming from the Fed, or without a major recession.

These are all reasons why I think it would be prudent to prepare for a moderate recession. So, continue building your reserves and reducing debt, just in case I’m right. If I’m wrong about these assumptions, no harm is done to your business or your family’s finances. And even in this environment, there are still opportunities worth pursuing. You don’t want to hunker down and do nothing but be incredibly strategic and picky about these opportunities.

Moving on to more practical advice for your daily life: does your email box sometimes seem like a treadmill of futility? We talk about the management of money on this Podcast, but for those longer-term listeners, you know that we also talk about the stewardship of time. Here are a few tips on being a better steward of your inbox.

Turn off your email notifications. Those dings, pop-up windows, or other interruptions can redirect your train of thought and have you immediately responding to an email that can wait. They can become distractions. You need to be in control of your inbox, rather than letting your inbox control you – so turn off those notifications.

Set specific times in the day to check your email. Let’s say that you set aside 11:00-12:00 in the morning and 4:00-5:00 in the afternoon to check your email. That gives you confidence to turn off those notifications because you know you’ll be processing your inbox twice a day. For most people, there are very few emails that are urgent enough to require a response in less than 4 hours. This schedule also allows you to be completely focused on your other tasks and conversations instead of being distracted by emails that can wait.

Consider triaging your email. Not every email needs an immediate response. Some can wait. Others don’t need a response at all. They are informational in nature and you can get to them whenever time permits. If you have a heavy email volume, you might think about setting up 2 or 3 folders that organize your inbox in order of urgency or in the type of email it is. I organize mine into the “Action Needed” folder, the “Information” folder, and the “Scheduling” folder. So if I happen to be traveling and need to make my email time count, I can hit that “Action Needed” folder first so that I can respond to anything that requires an action on my part. Be careful not to go overboard with this and spend too much time categorizing – just keep it simple to make sure the urgent and important emails get answered first, and let the others wait their turn.

Utilize automated inbox rules. If you need to respond immediately to your boss’s emails you can set rules to send his or her email to a certain folder, or flag it, or even have a special notification that goes off when one comes from them. If there are regular emails you receive daily or weekly that are not urgent, you can have your inbox rules send that to a certain folder or categorize it with a certain color. Automate the things that don’t require thought – particularly the reoccurring portions of your inbox.

Finally, if the email is going to take longer than 5 minutes, move it to your to-do list. I’ve found that my inbox is not the ideal place for to-do items. I treat my email inbox like my mailbox at home. Each day I take letters out of my mailbox, do the quick things first and save the other items for later. That’s the goal for email, to work through that inbox and put everything in its proper place so that actions can be taken at the right time.

This is just a sampling of ideas that I’ve found helpful personally as I try to tame my email inbox. We’re full of ideas at MBC/Foundation Bank on making our clients’ lives better. Our purpose as a bank is to invest in things that will outlive us. We’d love to have the opportunity to invest in your financial life. Whether you are trying to borrow money for today, or save for the future, we’ve got a host of teammates and strategies to help you do it well. If you’ve found this podcast helpful, we hope you’ll subscribe to it in your favorite podcast app and share it on social media. Until our next episode, God bless you.

-President Chad P. Wilson, CFP

Today’s episode of “Money Matters” was written and recorded by President Chad P. Wilson of McKenzie Banking Company / Foundation Bank on January 24, 2023. This episode does not constitute financial advice. Please consult a financial professional to discuss your specific needs. MBC/Foundation Bank is an Equal Housing Lender, Member FDIC.