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 December 5, 2022

Weekly Market Commentary

December 05, 2022

 

The Markets

 

What will it take to slow this economy down?

 

In 2001, railway workers slowed a runaway train in Ohio by latching a second engine to the back of the locomotive and applying the brakes. In all, the train traveled sixty-six miles over two hours, decelerating from a maximum speed of 47 miles per hour to 10 miles per hour before workers regained control of it, according to CNN.

 

Throughout 2022, the United States Federal Reserve has been trying to slow inflation by putting the brakes on the U.S. economy. So far, the Fed has raised rates six times, but the economy continues to grow apace. Last week, the Bureau of Economic Analysis reported the economy grew faster than originally thought from July through September 2022. Gross domestic product (GDP), which is the value of all goods and services produced by the U.S., was up 2.9 percent, annualized, rather than 2.6 percent as the advance estimate indicated.

 

Last week’s unemployment report also suggested the economy remains strong. More jobs were added than economists expected, and the unemployment rate remained at 3.7 percent. Average hourly earnings also increased faster than expected, up 5.1 percent over the last 12 months.

 

Megan Cassella of Barron’s reported, “The biggest outstanding obstacle to the Federal Reserve’s success in reining in inflation boils down to a numbers problem: There aren’t enough workers in the [United States]. Simply put, labor supply and demand need to come back into balance to contain wage growth and services inflation, which continues to climb…A combination of factors is contributing to the dearth of workers, from Baby Boomer retirements and falling immigration to a low birth rate and long COVID. Together, they suggest that shortages are here to stay.”

 

Last week, stock and bond markets rallied following Fed Chair Jerome Powell’s mid-week speech, in which he confirmed it was likely December’s rate increase would be smaller than the last few increases have been. Later in the week, the strong employment report checked investors’ enthusiasm. Regardless, major U.S. indices finished higher, reported Nicholas Jasinski of Barron’s, and Treasury yields finished the week mostly lower.

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.

 

CAN YOU BELIEVE IT’S DECEMBER ALREADY? According to Andy Williams, Garth Brooks and Kylie Minogue, “It’s the Most Wonderful Time of the Year.” During December, holiday enthusiasts don ugly sweaters, wheedle recipes out of relatives, light a wealth of candles, and celebrate a diversity of holidays. See what you know about this magical time of the year by taking our brief quiz.

 

1.   Which of the following holidays is NOT celebrated in December?

a.   International Ninja Day

b.   Sacher-Torte Day

c.    Dewey-Decimal System Day

d.   National Take Down the Christmas Tree Day

 

2.   Scientists have studied the psychology of gift giving. They find that the most valued presents are:

a.   Expensive gifts that make others envious

b.   Beautifully wrapped gifts that are pleasing to the eye

c.    Sentimental gifts that bring joy and happiness

d.   Thoughtful gifts that reflect the recipient’s hobbies and interests

 

3.   Which generation is expected to spend the most ($1,823) on gifts, travel and entertainment this holiday season?

a.   Gen Z (Ages 9 to 24)

b.   Millennials (Ages 25 to 40)

c.    Gen X (Ages 41 to 56)

d.   Boomers (Ages 57 to 75)

 

4.   When did the New Year’s Eve ball drop first take place in Times Square? (Hint: Teddy Roosevelt was President.)

a.   1893

b.   1907

c.    1920

d.   1945

 

If you have any questions, get in touch.

 

Weekly Focus – Think About It

“Gratitude unlocks the fullness of life. It turns what we have into enough, and more. It turns denial into acceptance, chaos to order, confusion to clarity. It can turn a meal into a feast, a house into a home, a stranger into a friend.”

—Melody Beattie, author

 

Answers: 1) d; 2) c; 3) b; 4) b

Continue reading
202 Hits

Weekly Market Commentary November 28, 2022

Weekly Market Commentary

November 28, 2022

 

The Markets

 

There was a shift in the winds of monetary policy.

 

Last week, it became clear the Federal Reserve (Fed) had softened its hawkish stance. The minutes of the central bank’s November policy meeting indicated the Fed was likely to slow the pace of rate hikes soon. There was a caveat, though. The minutes noted:

 

“…with inflation showing little sign thus far of abating, and with supply and demand imbalances in the economy persisting…the ultimate level of the federal funds rate that would be necessary to achieve the Committee’s goals was somewhat higher than [Fed officials] had previously expected.”

 

In other words, rate hikes are likely to be smaller in the future, but the federal funds rate will probably move higher than previously expected. Last week, the CME FedWatch Tool suggested that the federal funds target range will:

 

·        Increase 0.50 percent in December to 4.25 to 4.50 percent.

·        Rise to 5.0 percent to 5.25 percent during 2023.

·        Fall to 4.5 percent to 4.75 percent by the end of next year.

 

Weaker economic data seemed to support the Fed’s pivot. Molly Smith of Bloomberg reported, “Fresh evidence Wednesday pointed to a slowing U.S. economy and a cooling labor market that suggests steep interest-rate hikes by the Federal Reserve are starting to have a broader impact. Business activity contracted for a fifth month in November and applications for unemployment benefits rose last week to a three-month high. While consumer sentiment and new-home sales improved, both remain depressed and indicate a weaker spending appetite and subdued housing demand.”

 

Investors celebrated the Fed’s stance adjustment, and major U.S. stock indices pushed higher last week. Yields on U.S. Treasuries with maturities of one year or less moved higher last week, while yields on longer maturities moved lower.

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.

 

SHORT TAKES. The Federal Reserve’s pivot wasn’t the only interesting event last week. Here are some other occurrences that may prove to be of interest to investors.

 

A cure for the “Royal disease”. In the 1800s and early 1900s, royalty in Britain, Germany, Russia and Spain suffered from hemophilia, a genetic disorder that prevents blood from clotting. Last week, the U.S. Food and Drug Administration approved the first gene therapy treatment for hemophilia. The treatment, which is administered once, has a price tag of $3.5 million. Cell and gene therapies are expected to change the way disease is treated, but the price begs the question: Could Royals even have afforded it?

 

Ready, set, shop! About two-thirds of American holiday shoppers – and the National Retail Federation (NRF) anticipate that number will be more than 166 million this year – planned to shop in brick-and-mortar to stores over Thanksgiving weekend. More than a third were planning to go online on Cyber Monday. The NRF estimates sales will be up 6 percent to 8 percent over November and December. It remains to be seen how holiday deals will affect companies’ profits.

 

Pandemic redux. The number of daily COVID-19 cases in China reached a record high last week, affecting the cities of Beijing, Chongqing and Guangzhou. “Cities are once again expanding their testing efforts and building makeshift hospitals to quarantine the growing number of people who are infected. Though no city-wide lockdowns have been announced, the widespread restrictions are increasingly paralyzing economic activities, even as authorities pledge to make their responses more targeted and less disruptive,” reported Bloomberg News.

 

We hope you stay healthy and achieve all your shopping goals during the holidays! 

 

Weekly Focus – Think About It

“Never be limited by other people's limited imaginations. If you adopt their attitudes, then the possibility won't exist because you'll have already shut it out...You can hear other people's wisdom, but you've got to re-evaluate the world for yourself.”

—Mae C. Jemison, astronaut

Continue reading
202 Hits

Weekly Market Commentary November 21, 2022

Weekly Market Commentary

November 21, 2022

 

The Markets

 

Thanksgiving and football go together like turkey and stuffing.

 

For some families, though, this year may be more like a turducken, stuffed with American football and the sport the rest of the world knows as football (soccer). The men’s World Cup, which is played every four years for national glory, the Jules Rimet trophy, and millions of dollars in prize money, began on Sunday and will end on December 18.

 

During the tournament, researchers may track the influence of sentiment on markets. According to Mark Hulbert of MarketWatch, previous research has found that a team’s performance – especially a loss – can have a short but powerful effect on the national mood.

 

“You would be excused for being skeptical that a soccer tournament has anything to do with the stock market. But you need to understand how disheartened a country’s investors can become after their team loses in the World Cup. A significant body of academic research has found that their dejection has a pronounced impact on the stock market,” reported Hulbert. “…our moods play a powerful role on our investment decisions. We tell ourselves that we base our portfolio decisions solely on sober and rational analysis. As the academic research into the World Cup Effect reminds us, this isn’t always so.”

 

Investors in the United States were a bit dejected last week. Stronger-than-expected retail sales in October indicated consumer demand remained strong, despite the Federal Reserve’s efforts to slow spending by raising rates. Hawkish commentary from multiple members of the Federal Reserve also affected markets as it suggested the Fed is not ready to pause its inflation fight any time soon, reported Ben Levisohn of Barron’s.

 

Last week, major U.S. stock indices moved lower, and yields on shorter-term Treasuries moved higher. The yield on a 2-month Treasury bill finished the week at 4.2 percent, while the yield on the benchmark 10-year Treasury ended the week at 3.8 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.

 

IT’S THAT TIME OF THE YEAR. In mid-November, people begin to prognosticate and predict, offering their thoughts about what the future may hold. While everyone else is future-gazing, we thought it might be interesting to look at some past predictions and see how they panned out.

 

·        A shorter alphabet and taller Americans. In 1900, John Elfreth Watkins, Jr. published an article in the Ladies Home Journal titled, “What May Happen in the Next Hundred Years”. He forecasted that the population of the United States would reach 350 to 500 million people, Americans would be one to two inches taller, and life expectancy would increase to age 50 from age 35. He also thought the letters ‘C’, ‘X’ and ‘Q’ would be eliminated from the alphabet because people would begin to spell words the way they sound.

 

·        Remote work and uploading brains. At the 1964 New York World’s Fair, science-fiction writer and futurist Arthur C. Clarke said, “Trying to predict the future is a discouraging and hazardous occupation.” That didn’t stop him, though. Clark predicted that advancements in communication, especially satellites, would make it possible for people to be in instant contact with each other. They would be able to get in touch, no matter where they were, allowing everyone to work remotely. He also suggested that a machine might be developed to transfer information directly to the human brain, making it possible to become an instant expert on any topic.

 

·        ESG and economic indicators that reflect values. In a 1968 edition of Harvard Business Review, environmentalist and futurist Hazel Henderson predicted that companies would be motivated to pollute less, build mass transit, recycle goods and pursue other actions through a combination of social pressure, media attention and the desire for financial gain. She also thought economic indicators would be adapted to reflect “a healthy bottom line in financial terms as well as an additional bottom line that addresses people's growth needs and their psychological, spiritual and cultural values.”

 

Through the end of 2022, we expect there will be predictions about the war in Ukraine, the likelihood of recession, changes in energy supplies, the future of social media, and much more. If you have any questions about how our changing world may affect your financial goals and investment portfolio, please let us know.

 

Weekly Focus – Think About It

“It's tough to make predictions, especially about the future.”

—Yogi Berra, baseball player, manager and coach

Continue reading
334 Hits

Weekly Market Commentary November 14, 2022

Weekly Market Commentary

November 14, 2022

 

The Markets

 

Last week was remarkable for many reasons.

 

One reason is that sky watchers around the world had an opportunity to see a total lunar eclipse. The moon, Earth and sun aligned, causing the moon to appear crimson. We won’t see another total lunar eclipse for three years, reported Denise Chow of NBC News.

 

Another reason, and one that’s far more important to consumers and investors, is that data suggested inflation may be waning. The Consumer Price Index, which is a measure of inflation, was released last week. It showed that prices rose more slowly than expected in October. On an annual basis:

 

·        Headline inflation fell to 7.7 percent in October from 8.2 percent in September.

·        Core inflation, which excludes food and energy prices, fell to 6.3 percent in October from 6.6 percent in September.

 

Investors were enthusiastic, hoping the Federal Reserve (Fed) might begin to take a more measured approach to monetary policy tightening. Fed officials were probably happy, too, although inflation remains well above their two percent target. “Central bank officials have emphasized they will need to see several months of deceleration in price gains before they will be convinced they have made progress in their fight against inflation,” reported Megan Cassella of Barron’s

 

The inflation news may lift consumers’ spirits, too. Last week, the University of Michigan Consumer Sentiment Survey reported that sentiment dropped sharply in October, erasing about half of recent gains. “Instability in sentiment is likely to continue, a reflection of uncertainty over both global factors and the eventual outcomes of the election,” reported Surveys of Consumers Director Joanne W. Hsu.

 

Last week, the Standard & Poor’s 500 Index finished the week up 5.9 percent, the Dow Jones Industrial Average gained 4.1 percent, and the Nasdaq Composite rose 8.1 percent, reported Avi Salzman of Barron’s. Treasury yields declined although the yield curve remained inverted.

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.

 

IT WAS A DIFFICULT WEEK FOR MARKET GENIUSES. Last week, there was extraordinary drama in financial markets. It made the ups and downs of stock and bond markets seem almost mundane. Here’s what happened:

 

Tales from cryptocurrency. The world’s third largest cryptocurrency exchange declared bankruptcy after suffering the 21st century equivalent of a bank run. It was similar to the townspeople crowding into the Bailey Building and Loan in Frank Capra’s It’s a Wonderful Life. In the film, George Bailey uses his honeymoon money to avoid a collapse. The founder of the cryptocurrency exchange had a shortfall of about $8 billion, reported Philip van Doorn of MarketWatch.

 

When asked about the bankruptcy, U.S. Treasury secretary Janet Yellen said that cryptocurrencies require careful regulation, reported Christopher Condon of Bloomberg. “In other regulated exchanges, you would have segregation of customer assets,” Yellen said. “The notion you could use the deposits of customers of an exchange and lend them to a separate enterprise that you control to do leveraged, risky investments – that wouldn’t be something that’s allowed.” 

 

It's not easy. A popular social media company was recently privatized, which means that all shares of its stock were purchased by a new owner, and it no longer trades on a stock exchange. In this case, the purchaser was one of the world’s wealthiest individuals, who used his own money along with $13 billion in financing from large investors and private banks, reported Reuters.

 

The owners of privately held companies are not constrained by regulation or boards of directors, which can be advantageous, although that hasn’t proven out in this case, so far. The company’s new leader implemented a subscription service that produced undesirable results. “Once the option was available, users started creating accounts pretending to be major brands and politicians, fooling users and potentially jeopardizing [the social media company’s] now-shaky reputation with top advertisers,” reported Davey Alba and Kurt Wagner of Bloomberg.

 

“Companies led by lone geniuses need strong governance first and foremost,” said Yale School of Management’s Jeffrey Sonnenfeld in an interview with CNBC. “Having built-in checks and balances and a board that has field expertise as well as the ability to watch out for mission creep is critical to allowing these businesses to function with less risk of costly blunders.”

 

Weekly Focus – Think About It

“These are the times in which a genius would wish to live. It is not in the still calm of life, or the repose of a pacific station, that great characters are formed. The habits of a vigorous mind are formed in contending with difficulties. Great necessities call out great virtues. When a mind is raised, and animated by scenes that engage the heart, then those qualities which would otherwise lay dormant, wake into life and form the character of the hero and the statesman.”

—Abigail Adams, Founding Mother

Continue reading
274 Hits

Weekly Market Commentary November 7, 2022

Weekly Market Commentary

November 07, 2022

 

The Markets

 

It’s the lag time.

 

To no one’s surprise, the Federal Reserve continued to battle inflation last week, raising the federal funds rate for the fourth time this year, reported Claire Ballentine of Bloomberg. The Fed is making borrowing more expensive to dampen demand for goods, which should lower inflation – but it’s not a quick fix.

 

Rate hikes are kind of like winter planting. In cold weather areas, people sometimes spread grass seed in November with the expectation that it will germinate the next spring. It’s similar for rate hikes. The Fed lifts rates with the expectation that the increases will work their way through the economy over the next 12 to 18 months and bring inflation down, reported Matt Levin of MarketPlace.

 

That lag time can make it difficult for the Fed to know when it has done enough.

 

Over the last eight months, the Fed’s benchmark rate has increased from near zero to 3.75 percent, reported Nicholas Jasinski of Barron’s. Over that period, inflation, as measured by the Personal Consumption Expenditures (PCE) Price Index, has moved slightly lower. In March, the headline PCE Price Index was 6.6 percent, year-over-year. In September, it was 6.2 percent. The core PCE Price Index, which excludes food and energy prices, was 5.2 percent in March, year-over-year, and 5.1 percent in September.

 

Last week’s unemployment report showed the economy remains strong, but there were signs that Fed rate hikes are beginning to have an effect. The rate of new jobs growth slowed even as U.S. businesses reported stronger-than-expected hiring increases, reported Jeff Cox of CNBC. Jobs gains were spread across industries, and average hourly earnings increased. In addition, the number of layoffs rose, although the number remained at historically low levels, according to Augusta Saraiva and Reade Pickert of Bloomberg.

 

Last week, major U.S. stock indices finished lower. Treasury yields rose across all maturities as investors priced in the expectation that the Fed will keep raising rates into 2023.

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.

 

BASEBALL PLAYERS ARE SUPERSTITIOUS AND SO ARE INVESTORS. The sport of baseball is steeped in superstition. Many players, managers and announcers follow routines and unspoken rules. For example, some say that mentioning the possibility of a no-hitter while it is in progress can jinx the outcome.

 

In 2020, ESPN’s Tim Kurkjian reported on the routines of retired pitcher Edward Mujica. “He always has to be in the same spot of the bullpen with two outs in the fourth inning of every game. Then, in the fifth inning, he always digs a hole at the front end of the bullpen mound. Then he spits a half cup of red Gatorade into the hole…”

 

Mujica is not alone. It was rumored that outfielder Torii Hunter cleaned his spikes at exactly 6:40 p.m. before every 7:05 p.m. game, reliever Sean Burnett had a poker chip in his pocket whenever he pitched, and infielder Ryan Zimmerman always used the same shower stall.

 

Throughout this year’s World Series, we’ve been hearing about another superstition: When the Philadelphia Phillies win the World Series, the U.S. economy tends to slide into recession or the market falls. The Phillies lost over the weekend, and the Astros took home the pennant. Before you breathe a sigh of relief, thinking the Phillies loss will spare the economy and stock markets, check out the data.

 

From 20,000 feet, the data made for some great clickbait headlines, but when you look closer the facts don’t support the supposition. The Phillies won titles in 1929, 1980 and 2008.

 

·        In 1929, the World Series game was played in early October. The recession had begun two months before, in August 1929. That’s when the stock market began to decline, too.

 

·        In 1980, the World Series was played in mid-October. The recession had begun in January 1980, and the stock market decline started in February.

 

·        In 2008, the World Series was played in late October. The recession had begun the previous year, in December. The stock market decline also began in 2007.

 

Then, of course, there is the fact that there have been many recessions and market downturns during years the Phillies weren’t in the World Series. It looks like this superstition will have to be benched alongside the Hemline Indicator (the stock market rises and falls with the women’s hemlines), the Pigskin Predictor (when an original NFL team wins the Super Bowl, stocks go up), and the Triple Crown Corollary (when one horse wins the Triple Crown, the Dow drops).

 

Weekly Focus – Think About It

“If a black cat crosses your path, it signifies that the animal is going somewhere.”

—Groucho Marx, comedian

Continue reading
214 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.