Contact Us Today!

For a free, no obligation consultation!

 

Morgan Kenwood Newsletter

Subscribe for Weekly Commentary on the latest economic developments and updates on our Firm.

Weekly Market Commentary September 9, 2023

 Weekly Market Commentary

September 11, 2023

 

The Markets

 

All the work, work, work.

 

2023 has been a remarkable year so far. It has, “confounded economists, humbled forecasters, and rewarded investors. Despite a rapid rise in interest rates, the U.S. economy continues to grow. Inflation has fallen – if not quite to desired levels – and stocks have entered a bull market, with the S&P 500 gaining 17% year to date and the Nasdaq Composite up more than 30%,” reported Nicholas Jasinski of Barron’s.

 

One of the biggest surprises has been the strength of the labor market. Over the 12-month period through August 31, 2023, employers added about 271,000 new jobs each month, on average, according to the U.S. Bureau of Labor Statistics. (In August, 187,000 new jobs were created, suggesting some labor market softening.)

 

So far this year, we’ve seen:

 

4-of-5 prime-age workers working. Last summer, the employment-to-population ratio, which compares the number of people employed to the civilian population of a city, state or country, reached a 20-year high for 25- to 54-year-olds. In June, July and August, the ratio was 80.9 percent, according to the St. Louis Federal Reserve (SLFR).

 

“This ratio is a good barometer of the overall health of the labor market because it excludes younger people who are more likely to be in and out of school as well as older people who may be retired,” reported Stephanie Hughes of Marketplace.

 

The employment-to-population ratio for women hit a record high. In the second quarter, the employment-to-population ratio for women reached 75 percent – a new record. Three-of-4 women, ages 25 to 54, were employed, according to the SLFR.

 

“Women are crushing it in the labor market right now – their return to work from the pandemic has been faster than men’s…A big part of this is the rise of remote and flexible work, which has enabled a record number of women with young children to enter or remain in the workforce,” reported Emily Peck of Axios Markets.

 

The labor force participation rate increase. The labor force participation rate – the number of people who are employed or are seeking employment – remained stubbornly low even after the U.S. economy reopened following pandemic closures. In August, the labor force participation rate increased to the highest level since the pandemic.

 

“The labor market continues to rebalance in a healthy direction. The U.S. economy is still adding jobs…And, for employers, there are now more workers available per open positions, and wage pressures are abating,” reported Jasinski of Barron’s.

 

Last week, major U.S. stock indices moved lower when economic data raised concerns the Fed may need to raise rates again, according to Barron’s. In the Treasury market, the yield on the 30-year U.S. Treasury bond finished the week at 4.3 percent.

 

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. 

Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

 

HEADWINDS FOR HOME BUYERS. If you’ve ever taken a long bike ride on a windy day, you know that cycling into a headwind can be difficult and discouraging. Riders spend more energy, travel more slowly, and may give up before reaching their goal. During much of 2023, prospective homebuyers have encountered strong market headwinds, including low inventory, high prices, lots of competition, and rising mortgage rates.

 

The United States has been experiencing a sellers’ market – where home sellers have an advantage over home buyers. In times like these, it can be difficult to remember that residential real estate tends to be cyclical. While buyers face headwinds today, the market is likely to shift in the future, giving buyers the advantage.

 

Determining where we are in the cycle has become more challenging because new factors are affecting the market. These include:

 

The popularity of remote work. “One thing that has surprised me is the permanence of work-from-home. If you look at how many people are going to the office, it has decreased significantly. Even for people who returned to the office, it’s not every day. So if you only have to be in the office a few days a week, you’re willing to have a longer commute. Demand for more space in certain areas of the country has increased, which has boosted house prices,” said Northwestern University Associate Professor Charles Nathanson in an interview with Kellogg Insight.

 

Concerns about climate risks. Eighty-three percent of prospective home buyers consider the risk of flood, hurricane, wildfire, extreme temperatures, and drought, according to a new survey. Climate risks are considered by 90 percent prospective homebuyers in the West, 85 percent in the Northeast, 79 percent in the South, and 77 percent in the Midwest.

 

Housing prices remained flat, year-over-year, in June 2023, according to the S&P CoreLogic Case-Shiller U.S. National Home Price Index. The 20-city index showed prices moving higher in 10 cities and lower in 10 cities.

 

Weekly Focus – Think About It

The one thing all humans share is that we all inhabit the same limited amount of real estate, which is Planet Earth.

—Bjarke Ingels,architect

Continue reading
129 Hits

Weekly Market Commentary September 5, 2023

Weekly Market Commentary

September 05, 2023

 

The Markets

 

Lowering inflation.

 

If you’ve ever waited in traffic while the center section of a bridge lifts to allow ships and sailboats to pass underneath, you may have noticed the enormous counterweight that lowers as the bridge moves higher. When the boats have passed, the counterweight rises, and the bridge lowers back into place.  

 

The Federal Reserve (Fed) often acts as a counterweight to the economy; raising and lowering interest rates to achieve its goals. Recently, the Fed has been raising rates to bring inflation down. Higher rates make borrowing more expensive, slowing economic growth and reducing demand for goods.

 

Over the past 18 months, the Fed has raised the effective federal funds rate from near zero to 5.33 percent. Last week, data suggested its efforts were working. The Personal Consumption Expenditures Price Index showed that headline inflation has dropped from a peak of 6.8 percent in June of 2022 to 3.3 percent in July 2023.

 

In addition, last week’s employment report showed jobs growth slowed in August. In an interesting twist, despite more jobs being created, the unemployment rate rose from 3.5 percent to 3.8 percent. It rose because the labor force participation rate increased as more people returned to the workforce and looked for jobs.

 

“This was a more complicated report than recent months’ with lots of cross-currents. Overall, it supports the soft-landing thesis for the economy, as the labor market is easing without major layoffs and wage dips…This seems like an ideal report for the Federal Reserve. Wage gains are coming down and payrolls are rising but at a much slower pace,” reported Katia Dmitrieva of Bloomberg.

 

Last week’s data left many believing the Fed will leave rates unchanged in September; however, there was disagreement about whether the Fed will remain on pause, resume rate hikes, or lower rates in the months ahead.

 

Markets embraced the idea of a Fed pause in September, and major U.S. stock indices moved higher last week, according to Barron’s. In addition, the yield on the one-year U.S. Treasury bill finished the week at 5.4 percent.

 

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. 

Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

 

DON’T TRUST YOUR EARS. There are pros and cons to artificial intelligence (AI). On the pro side, many people have found AI-powered digital assistants helpful. The assistants schedule events and offer reminders. They relay timely information about weather and traffic, help manage lights, thermostats, ovens, and other smart devices in homes.

 

On the con side, they’ve become a valuable tool for scammers. Recently, criminals have been using AI-generated voices to scam family members, friends and financial institutions.

 

The potential for vocal deception was demonstrated at a recent Senate hearing, which featured “a faked voice recording that was written by ChatGPT and vocalized by an audio application trained on [a U.S. Senator’s] Senate floor speeches,” reported Matt Berg of Politico. “’If you closed your eyes at the beginning of the hearing, you couldn’t have told that we were playing a voice clone of myself,’” commented the Senator.

 

Deepfake audio also has been used to mimic the voices of friends and family members. In another hearing, a mother who was targeted shared the story of receiving a phone call from her terrified teenage daughter and her kidnapper, who demanded a ransom. Only, it wasn’t the daughter – it was an AI-generated voice that sounded just like her, “reported Carter Evans and Analisa Novak of CBS News. 

 

There are ways for families and friends to protect against voice scams. These include:

 

·        Choosing a code word. Then, if a suspicious call is received, they can ask the caller for the code word.

·        Calling or texting the person who is making the emergency call (or someone with them). In the example above, the mother called her husband who confirmed their daughter was safe.

 

Since voice cloning often relies on publicly available audio, it can be a wise choice to make social media accounts private, and only accept followers who you know.

 

Weekly Focus – Think About It

And nowadays, the idea of AI is not really science fiction anymore – it’s just science fact.

—Lisa Joy, screenwriter and director

Continue reading
120 Hits

Weekly Market Commentary August 28, 2023

Weekly Market Commentary

August 28, 2023

 

The Markets

 

Becalmed.

 

The Chinese government’s zero-COVID policy took the wind from the sails of its economy. When the government finally ended the policy earlier this year, many economists anticipated that pent-up consumer demand would refill China’s economic sails, lifting the global economy, reported Malcolm Scott of Bloomberg. Instead, China’s economy is in an economic doldrum, recovering far more slowly than anyone anticipated. As a result, economists have steadily lowered 2023 growth forecasts for the country, reported Yahoo Finance and Diane King Hall.

 

The economy isn’t well-positioned to move ahead. From April through June, it advanced a desultory 0.8 percent. Unemployment among young people is so high that China stopped releasing the data in July, reported Minxin Pei of Bloomberg. In addition, a banking crisis may be on the horizon as China’s real estate sector, which comprises about 20 percent of the country’s economic growth, is experiencing a downturn. Also, government stimulus may be limited as China’s debt-to-GDP ratio is about 300 percent; the highest among emerging markets, reported economist Tao Wang in an interview with Vincent Ni of National Public Radio.

 

Recently, China attempted to stimulate growth and restore confidence by cutting a key interest rate, but investors were not impressed. The benchmark CSI 300 Index, which tracks the performance of 300 A-share stocks traded on the Shanghai Stock Exchange or the Shenzhen Stock Exchange, has fallen by 9 percent in recent weeks as overseas investors moved more than $10 billion away from Chinese stocks, reported Xie Yu and Yoruk Bahceli of Reuters.

 

Meanwhile, the U.S. economy continues to grow faster than anticipated. “Despite umpteen predictions of a slowdown, it keeps going and going. Recent data suggest it may even be on track for annualized growth of nearly 6% in the third quarter, a pace it has hit only a few times since 2000,” reported The Economist via Yahoo Finance.

 

The strong U.S. economy has impeded efforts to lower inflation. Last week, Federal Reserve Chair Jerome Powell confirmed that U.S. inflation remains too high. “As is often the case, we are navigating by the stars under cloudy skies…At upcoming meetings, we will assess our progress based on the totality of the data and the evolving outlook and risks…we will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data,” Powell said.

 

His comments were generally well-received. The Standard & Poor’s 500 and Nasdaq Composite Indices finished the week higher, while the Dow Jones Industrial Average moved lower, according to Barron’s. Yields on shorter-maturity U.S. Treasuries generally moved higher over the week.

 

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. 

Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

 

POP ECONOMICS. Taylor Swift’s Eras Tour, Beyoncé’s Renaissance World Tour, and movie blockbusters Oppenheimer and Barbie have created an economic juggernaut. Together, they’re expected to pump $8.5 billion into the U.S. economy. One consequence is that economists have increased forecasts for U.S. gross domestic product (GDP) growth this quarter.

 

See what you know about pop culture trends that are boosting economic growth by taking this brief quiz.

 

1.   Queen Bey tour kickoff had an unexpected impact on the Swedish economy. What was the “Beyoncé effect”?

a.   A record number of workers called in sick, exacerbating labor shortages.

b.   A Beyoncé-inspired tourism boom boosted inflation in May.

c.    Consumer sentiment rose and everyone was humming “Single Ladies (Put A Ring On It)”.

d.   All of the above

 

2.   When Taylor Swift’s tour arrived in Glendale, Arizona, the town temporarily changed its name. What was it called?

a.   Never-ever-ville

b.   Taylorville

c.    Swift City

d.   Tay Tay Town

 

3.   A recently released movie earned an odd accolade. It became the top-grossing film of all time to never have been number one at the domestic box office. Which movie was it?

a.   Barbie

b.   Mission Impossible: Dead Reckoning

c.    The Super Mario Brothers Movie

d.   Oppenheimer

 

4.   Barbie is the highest grossing film of 2023. It has earned more than $575 million in North America. How much has it made worldwide?

a.   $750 million

b.   $1.1 billion

c.    $1.3 billion

d.   $1.7 billion

 

Weekly Focus – Think About It

When you combine ignorance and leverage, you get some pretty interesting results.

—Warren Buffett, The Oracle of Omaha

 

 

 

Answers: 1) B. An $1,800 difference in U.S. and Swedish ticket prices inspired fans to travel. The rise in tourism may have resulted in higher-than-expected inflation in May, according to Dansk Bank’s chief economist. 2) C 3) D 4) C

Continue reading
113 Hits

Weekly Market Commentary August 21, 2023

 Weekly Market Commentary

August 21, 2023

 

The Markets

 

Higher bond yields may be good for income investors – and not so good for stock markets.

 

After more than a decade of near-zero interest rates, the “free money” era – a time when people and businesses could borrow money and repay it with very low (or no) interest – may be over.

 

Last year, rising inflation caused the Fed to begin raising the federal funds rate aggressively. Yields on bonds moved higher, too. At the end of last week, the yield on a one-year U.S. Treasury bill was 5.35 percent, up from only 0.40 percent at the start of 2022.

 

Many people thought rates and bond yields would come back down relatively quickly, but that school of thought is changing, reported Michael Mackenzie and Liz Capo McCormick of Bloomberg.

 

“All around the world, bond traders are finally coming to the realization that the rock-bottom yields of recent history might be gone for good…The surprisingly resilient US economy, ballooning debt and deficits, and escalating concerns that the Federal Reserve will hold interest rates high are driving yields on the longest-dated Treasuries back to the highest levels in over a decade. That’s prompted a rethink of what ‘normal’ in the Treasury market will look like…strategists are warning investors to brace for the return of the ‘5% world’ that prevailed before the global financial crisis.”

 

Higher bond yields may be good news for income-oriented investors who turned to dividend-paying stocks for income when bond yields were low. Now, those investors may be able to earn attractive yields with lower-risk Treasuries, reported Al Root of Barron’s.

 

It’s not such great news for stock markets, though. “…rising Treasury yields are a problem for stocks because investors will rotate out of riskier equities and into less-risky bonds because the additional return in stocks isn’t worth the volatility,” stated a source cited by Teresa Rivas of Barron’s.

 

Last week, major U.S. stock indices finished lower, while yields on longer-term U.S. Treasuries moved higher.

 

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. 

Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

 

JUST OUT OF REACH. If you’ve ever stretched on tippy-toe trying to pluck an apple from a tree or pull a bowl from the highest kitchen shelf – and haven’t been able reach it – then you’ve experienced a version of the frustration prospective homeowners are feeling.

 

In the United States, homeownership is an important means of accumulating wealth. Last week, Emily Peck of Axios wrote, “With home prices going up — and mortgage rates at a stunning 22-year-high — the situation is looking increasingly bleak for Americans looking to buy a house…Prognosticators had believed that rising mortgage rates would force home prices lower — and they did fall by 13% from their 2022 peak. But prices are still 26% higher than they were in the first quarter of 2020”

 

Americans who were eager to buy homes in the 1980s may have felt similarly bleak. While home prices were significantly lower 40 years ago – the median price was about $69,000 in 1981 versus $420,000 in the first half of 2023 – mortgage rates were considerably higher.

 

The highest ever 30-year fixed mortgage rate was 18.53 percent in October 1981. Last week, the average 30-year fixed mortgage rate was 7.09 percent, which is below the 52-year average of 7.74 percent, according to data from the Federal Home Loan Mortgage Corporation (aka Freddie Mac). Regardless, in tandem with higher home prices, it’s high enough to put owning a home out of reach for many Americans, right now.

 

In times like these, it’s important to remember that the economy is cyclical. We are in a period of expansion. Eventually, we will experience a recession. During recessions, rates tend to drop as the Fed tries to stimulate the economic growth. Home values can move lower, too, reported AJ Dellinger of Bankrate.com.

 

“Decreased demand and fewer buyers mean that fewer people are competing for the same inventory of homes. When that competition dries up, sellers lose the upper hand they enjoy in a roaring seller’s market like we’ve seen in recent years.”

 

Weekly Focus – Think About It

“My mama always said, life was like a box a chocolates. You never know what you’re gonna get.”

—Forrest Gump, movie character

Continue reading
113 Hits

Weekly Market Commentary August 14, 2023

Weekly Market Commentary

August 14, 2023

 

The Markets

 

Consumer sentiment is a lagging indicator. It’s also a contrarian indicator.

 

After rising sharply in June and July, consumer sentiment leveled off this month. The preliminary August reading for the University of Michigan Consumer Sentiment Index was 71.2. That’s slightly below July’s reading, although it’s up 22.3 percent year-over-year, and up 42 percent from its all-time low of 50 (June 2022). The historic average for the Index is 86.

 

“In general, consumers perceived few material differences in the economic environment from last month, but they saw substantial improvements relative to just three months ago. Year-ahead inflation expectations edged down from 3.4% last month to 3.3% this month, showing remarkable stability for three consecutive months,” wrote Surveys of Consumers Director Joanne Hsu.

 

The University of Michigan Consumer Sentiment survey provides information related to:

 

·        Current economic conditions by asking consumers about the current state of their personal finances, as well as business and buying conditions. In early August, this component of the survey was up 32.1 percent, year-over-year.

 

·        Expectations for future conditions by asking consumers about expectations for their personal finances, as well as business and buying conditions. In early August, this component was up 16.0 percent, year-over-year.

 

Consumer sentiment is a lagging indicator because it can take several months for changes in economic activity to be felt by consumers. This type of sentiment also is considered a contrarian indicator. John Rekenthaler of Morningstar explained, “When people are deeply unhappy, stocks are likely to thrive, because the economic damage that bothers them has already occurred. A contented populace, on the other hand, is the investment equivalent of red sky at morning. Equity shareholders, take warning.”

 

Mixed inflation data caused markets to stumble last week. The Standard & Poor’s 500 and Nasdaq Composite indices finished lower, while the Dow Jones Industrial Average moved slightly higher, reported Barron’s. Yields on U.S. Treasury notes and bonds rose.

 

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. 

Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

 

IS IT A SCAM? OR ISN’T IT? You may receive a request asking for contributions to a fund that helps families who’ve been devastated by Hawaiian wildfires, storms and flooding in New York, wind and tornadoes in Oklahoma, or another disaster. Before you send money, make sure it’s not a scam. In 2022, consumers in the United States lost almost $8.8 billion to fraud, according to the Federal Trade Commission (FTC).

 

Scammers often target people through email, text messages and phone calls. See what you know about protecting yourself from scams by taking this brief quiz.

 

1.   An email arrives with the logo of the U.S. Postal Service. It says your package could not be delivered because of an incomplete address. The email includes a link that you can click on to confirm your address. Which of the following actions can help you determine whether this is a scam? (Choose all that apply.)

 

a.   Look at the email address of the sender to see if matches the company name.

b.   Find the company’s phone number online, then call and ask about the package.

c.    Get excited about the unexpected gift, click on the link, and see where it takes you.

d.   Check the message for misspelled words and grammatical errors.

 

2.   Ding! It’s a text from an unknown number that reads, “Can you please get us in today? Muffers is really sick! She’s been laying on her side panting for four hours.” What do you do?

 

a.   Don’t respond.

b.   Respond by texting, “I think you have the wrong number.”

c.    Respond by texting, “This isn’t the veterinarian’s office.”

d.   Block the number.

 

3.   You’re looking online for off-campus student housing, but you know rental scams are common. What should you do if a listing is just what you’re hoping to find, but seems almost too good to be true?

 

a.   Look up the management company’s phone number/email online and call/send a message to confirm the availability of the listing, the listing agent’s name, and the rental address.

b.   Schedule an in-person walk-through (or have a trusted friend walk through for you).

c.    Offer to pay the deposit or application fee with a credit card. If the listing agent insists you wire money or pay with cryptocurrency, refuse to do it.

d.   All of the above

 

Fraud comes in all shapes and sizes – from adoption fraud to elder fraud, business fraud to consumer fraud, and imposter fraud to unemployment fraud. You can learn more about scams and ways to avoid them on the FTC.gov and USA.gov websites.

 

Weekly Focus – Think About It

“Good judgment comes from experience, and a lot of that comes from bad judgment.”

—Will Rogers, actor

Continue reading
133 Hits

Contact Details

Morgan Kenwood Advisors, LLC
5130 West Loomis Road
Greendale, WI 53129-1424
Phone: (414) 423-4020
Fax: (414) 423-4023
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.