Brace for a Bumpy Ride
Market Commentary

The Markets

There was some unwelcome information in recent economic data that caused markets to reassess expectations:

  • Inflation didn’t fall as fast as expected. The Consumer Price Index showed inflation rose 6.4 percent, year-over-year in January. That was an improvement over December’s pace and the seventh consecutive month of falling prices, but economists expected price increases to slow more quickly.
  • Consumer spending accelerated. Americans were in a buying mood. Spending rose 3.0 percent in January after declining in November and December of 2022.

Inflation May Not Be Over

Bullish sentiment in stock markets has been supported by the idea that inflation will continue to slow, and the Fed will be able to ease up on interest rates. The Economist suggested stock markets may be overly optimistic. The world’s battle with inflation may not be over.

What about the Bond Market?

After a chorus of Fed officials took the stage to let everyone listening know the federal funds rate would likely need to move higher – and stay higher – for longer, the bond market capitulated. This presents GOOD YIELD opportunities for short-term government bonds. This gives us a haven to wait out the market conditions. If you’d like a more detailed look at this, please reach out to me.

What Do You Value Most?

The 2022 Modern Wealth Survey, conducted for Charles Schwab by Logica Research, asked Americans whether personal values are more important to life decisions than they once were. The majority said yes.

“Almost three-quarters of Americans (73%) say their personal values guide how they make life decisions more today than they did two years ago, and nearly an equal number (69%) say that supporting causes they care most about is a top consideration when it comes to their financial decisions. When asked which personal values are their biggest motivators, Americans prioritize doing what’s best for others, including the environment and the greater good, as well as their family and friends, followed by saving more and reducing unnecessary spending.”

 

Defining and prioritizing values takes time and can be a challenging exercise. The Good Project, a research initiative at the Harvard Graduate School of Education’s Project Zero, offers an online value-sorting activity. Visitors review a list of 30 values and choose 10 to begin. The list includes options like:

  • Fame and success
  • Courage and risk-taking
  • Creativity and originality
  • Power and influence
  • Hard work and commitment
  • Faith
  • Pursuing the common good
  • Recognition in your field
  • Solitude and contemplation

A majority of each generational group that participated in the Modern Wealth Survey agreed that values affect their investment choices: 68 percent of Baby Boomers, 73 percent of Gen X, 75 percent of Millennials, and 82 percent of Gen Z.

Overall, “When looking at the factors that influence investment decisions, a company’s reputation (91%) and its corporate values (81%) are almost as important as more traditional factors like a company’s performance (96%) and its stock price (93%). As personal beliefs and interests become more important, many investors (84%) are also interested in having a more personalized investment portfolio.”

When I read this report, all of these values and results are what I experience in the clients, friends, and families of this practice. All of you are exceptional people who bring light, strength, and many times a touch of humor to all of us.

Focus – Think About It

“For me, I am driven by two main philosophies: know more today about the world than I knew yesterday and lessen the suffering of others. You’d be surprised how far that gets you.”

Neil deGrasse Tyson

Astrophysicist

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Disclaimers

* These views are those of Carson Coaching, not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate, and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the 3:00 p.m. (London time) gold price as reported by the London Bullion Market Association and is expressed in U.S. Dollars per fine troy ounce. The source for gold data is Federal Reserve Bank of St. Louis (FRED), https://fred.stlouisfed.org/series/GOLDPMGBD228NLBM.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.