- Stocks sold off this past week as interest rates (see below) shot higher in response to better than expected economic data, continued job gains and hawkish Fed minutes. Given the more than twenty-percent run off its October 2022 low, we’re probably at the point that stocks will need a catalyst to move substantially higher. That catalyst could come in many forms. However, we would expect it to be conjunction with a more dovish Fed or signals that the Fed is done raising rates. Moreover, we believe that a minor pullback is in order and in fact would be healthy for long-term investors.”
- The Fed released the minutes from its June 13-14 meeting which provided the following insight into future Fed policy:
- In “consideration of the significant cumulative tightening in the stance of monetary policy and the lags with which policy affects economic activity and inflation,” a unanimous decision was made to not hike interest rates.
- Of the 18 participants in the meeting, sixteen expect at least one more hike in interest rates this year. Twelve expected at least two or more.
- “The participants favoring a 25 basis point increase noted that the labor market remained very tight, momentum in economic activity had been stronger than earlier anticipated, and there were few clear signs that inflation was on a path to return to the Committee’s 2 percent objective over time.”
- The economy is at the stage of its cycle where the Fed will be moving in smaller increments over longer periods of time. This, working at the periphery, will in turn have less of an impact on the economy..
- Sign us up for the dog days of summer. Although summer can be lazy for many, for the financial markets summer can bring volatility as volume usually declines and those that are patient tend to be on vacation from their portfolios. This summer shouldn’t be much different. Investors should brace themselves for some volatility as earnings season will begin this week, the Fed will remain active and the economy is slowing in response to interest rate hikes over the past year.
- The interest paid on a 10-year U.S. Treasury note climbed above four percent since March 2, closing Friday at 4.06%. Moreover, the interest rates on 5- and 2-year notes closed Friday at 4.35% and 4.94%, respectively with the latter just off a sixteen year high of 4.99%, posted on Thursday, July 6. In our opinion, laddering Treasuries for a portion of your assets makes sense for many, especially if you are trying to establish a predictable stream of income.
- The Dow Jones Transport Average was the only major index that closed in the positive this past week suggesting that perhaps the economy will remain more vibrant than many anticipate. The index which tracks the nation’s truckers, rails and airlines has risen 16.19% thus far in 2023 and by 16.14% over the past year, trailing only the tech-heavy NASDAQ Composite.
- According to a survey from Bankate.com, “Americans feel they’d need to earn approximately $233,000 a year on average to be secure or comfortable with their finances.” However, according to data collected by the U.S. Census Bureau, the average full-time worker earned $75,203 during 2021. The survey also found that in order to be rich and achieve financial freedom, those polled they would need to earn approximately $483,000, on average. According to a different survey, one done by Charles Schwab & Company earlier this year, American workers think they need $1.7 million to retire comfortably.
- Bond yields climb as economic data remains firm. All eyes will be on the labor market data being released this coming week with the Job Openings and Labor Turnover Survey (JOLTS) on Wednesday and the June Non-Farm Payroll Data following on Friday. We believe that should both reports indicate a strong labor market, the yield on the 10-year U.S. Treasury Note which currently stands at 3.85% may move above 4.00% which we believe would then merit serious consideration for purchase.
- Has Disney lost its magic at the box office? Time will tell. However, the fact that revenue for the first three days from its latest release, “Indiana Jones and the Dial of Destiny,” totaled less than $60 million is somewhat of a warning sign that perhaps the $295 million budget went overboard.
- Meta Platforms (META) launched their “Twitter Killer” Threads this past week and as of a day or so ago had signed up more than 70 million users, a little less than 1/3 the number of Twitter users, approximately 238 million. We’ll bet Elon Musk wishes he had some of his $40-plus billion back he paid for Twitter one year ago when he took the company private.
- (We love the following.) Many investors confuse volatility with risk. It is a fact that over the short-term, the financial markets can be both volatile as well as risky. However, over the long-term, they are much less so. It is with this in mind, that we choose to focus on the long-term and let the short-term take care of itself.
- Apple’s market cap closes above $3 trillion for the first time ever Friday. Numbers this size tend to lose significance so consider this – According to Dimensional’s Matrix Book, Apple’s market cap now exceeds that of every country except the United States and is twice the size of Germany’s entire publicly traded stock market. In fact, Apple lags only the United States, China, Japan, Germany and India in terms of their market capitalization as compared to Gross Domestic Product (GDP).
- Upcoming Economic Reports scheduled to be released this week include the following, on Monday, May Wholesale Inventories and May Consumer Credit; on Wednesday, June Consumer Price Index (CPI); on Thursday, the Weekly Report of Initial Claims for Unemployment Insurance as well as the Producer Price Index (PPI) and on Friday, Preliminary Consumer Sentiment from the University of Michigan.
- Second quarter earnings season kicks off this coming week. Companies reporting of note, include – Helen of Troy (HELE), PriceSmart (PSMT), Conagra (CAG), PepsiCo (PEP), Progressive (PGR), Cintas (CTAS), Fastenal (FAST), Delta Air (DAL), State Street (STT), Wells Fargo (WFC), BlackRock (BLK), Citigroup (C), United Health (UNH), and JP Morgan (JPM).
“This presentation is not an offer or solicitation to buy or sell securities. The information contained in this presentation has been compiled from third party sources and is believed to be reliable, but its accuracy is not guaranteed and should not be relied upon in any way, whatsoever. Fagan portfolio characteristics and holdings are subject to change at any time and are based on a representative portfolio. Holdings and portfolio characteristics of individual client portfolios may differ, sometimes significantly, from those shown. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities listed.
Additional information including management fees and expenses is provided on our Form ADV Part 2. The actual return and value of an account fluctuate and, at any time, the account may be worth more or less than the amount invested. Bond Investments are affected by interest rate changes and the credit-worthiness of the issues held in the portfolio. A rise in interest rates will cause a decrease in the value of fixed income positions. Past performance results are not indicative of future results.”
