A New CFP®, Jittery About the Fed, and A Christmas Miracle

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December 11, 2022

SHE’S DONE IT AGAIN!: At the beginning of the year, our Financial Planning Director, Cassie Queen, set goals. They were ambitious. She has been doing financial planning for many years, but she decided that this was the year to get some designations. By year end, she wanted to get her designations as a Chartered Financial Consultant® and Certified Financial Planner®. That added up to 3 college-level courses, a 3-month board exam preparatory program, and a board exam. In October she obtained the Chartered Financial Consultant® designation. And now I am proud to announce that she has obtained her Certified Financial Planner® designation! Congratulations, and well done!

PRODUCER PRICE INDEX: The Producer Price Index measures prices U.S producers receive for their output. It is a measure of inflation at the wholesale level. It rose 0.3% in November, and the 12-month rise is now 7.4%, down from October’s 8.1% reading and down from the 11.7% peak last March. The 0.3% month over month increase was the same as the prior two months. However, a poll of economists by the Wall Street Journal expected a 0.2% rise. Because it was higher than expected, it spooked the markets, causing the markets to end the week with a thud.

STOCKS MOVE DOWN BECAUSE THE ECONOMY IS SHOWING SIGNS OF RESILIENCE: The Fed makes its next decision on interest rates on Wednesday, and the markets are jittery, responding to any bit of data that might influence the Fed in one direction or the other. Last week, the Producer Price Index rose a bit more than had been expected. The Institute for Supply Management’s reading on the services sector of the economy rose in November. Factory orders in the U.S. were up in the most recent Commerce Department announcement. These all came on the heels of last Friday’s strong labor report. This all adds up to a resilient economy, and good economic data makes investors worry about a continually aggressive Fed. We’ll see what the Fed does this week.

LONGER-TERM PERFORMANCE: Below are the annualized three-year and five-year numbers for these same indices.

ESG BONDS: If you have not yet heard the term ‘ESG investing,’ you will. The ‘E’ in ESG stands for ‘environmental.’ Sales of new, green, social, sustainability and sustainability-linked bonds around the world are about $636 billion in 2022 so far. That is about a 30% drop from the prior year. Sales of green bonds, the largest category of so-called sustainable debt are down 23% for the year. Until this year, green bond issuers enjoyed a price benefit. Buyers were willing to buy bonds with less income potential. That seems to have shifted, and now issuers have to offer a higher interest rate to make them competitive. This has slowed the momentum of sales for these bonds. These investments have become a bit of a political football. There is intense political and business pressure on both sides that distort the pricing and sales of these bonds, so it is difficult to project how they will do in the future. Companies and governments are turning to the global debt market to raise trillions of dollars needed to fund the transition to low carbon emissions. Top banks in North America and Europe stand to boost revenue by as much as 10% by 2030 as they commit to funding these transition ventures.

CHINESE EXPORTS SINK: Last month, Chinese exports were 8.7% less than they had been a year ago. Demand for Chinese products has been waning, and China’s ability to produce has been hurt by its severe COVID lockdown activities. Some of the waning demand has been caused by rising interest rates which central banks are using to slow economic activity. Exports to the U.S. fell by a whopping 25%. A dictate from China’s politburo last week said that the Chinese government has to “better coordinate pandemic prevention and the need for economic and social development.” The massive protests may have helped the Chinese government reach that conclusion.

CANADA RAISES RATES: The Bank of Canada raised its main interest rate by 0.50% to 4.25%. In doing so, the central bank signaled that due to slowing economic growth in Canada, the Bank is likely at or near the end of its rapid rate increases. Canada’s rate of inflation was at 6.9% in October, down from the peak of 8.1% in June.

SOME INTERESTING CHANGES FOR 2023: In 2023, the amount of income you may electively defer to a 401(k) or 403(b) plan will increase from $20,500 to $22,500. If you are 50 or over, the additional amount you can defer is $7,500, up by $1,000 from 2022. So, someone 50 or older can defer $30,000. The limit on annual contributions to an IRA will increase from $6,000 to $6,500. For those 50 and older, the additional amount you can add remains $1,000.

IF THESE TWO GUYS CAN GET ALONG…: We had some people over to our house, and one of the guests showed up in this awful, offensive hat. So I went and got my righteous hat, and we posed for this picture. If these two guys can get along, surely rifts of all sorts can be overcome!

Have a great week!

Our mission is to help you see the objective, find the path, and navigate past the obstacles to a more prosperous future.

Douglas R. MacGray, J.D., C.F.P. ®
Stonecrop Wealth Advisors, LLC

Direct | Cell | Fax
(610) 628 4545

“You’ll never be disappointed if you always keep an eye on uncharted territory, where you’ll be challenged and growing and having fun.” Kirstie Alley

“Be completely humble and gentle. Be patient, bearing with one another in love.” Ephesians 4:2 (NIV)

CHINESE EXPORTS SINK: wsj.com/articles/chinese-exports-fall-at-steepest-pace-in-more-than-two-years
CANADA RAISES RATES: wsj.com/articles/bank-of-canada-lifts-interest-rates-by-half-point
ESG BONDS: https://www.bloomberg.com/news/articles/2022-12-07/global-esg-bond-issuance-headed-for-first-full-year-decline-ever?leadSource=uverify%20wall AND https://www.advisorhub.com/bank-of-america-pushes-esg-with-bankers-on-3000-call-a-day-pace/
PRODUCER PRICE INDEX: wsj.com/articles/u-s-supplier-price-increases-eased-in-november
SOME INTERESTING CHANGES FOR 2023: irs.gov/newsroom/401k-limit-increases-to-22500-for-2023-ira-limit-rises-to-6500

(c) 2022 A.D., Stonecrop Wealth Advisors, LLC, All Rights Reserved

*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets.
*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States.
*Bloomberg Barclays U.S. Aggregate: This is a measure of the U.S. bond markets.

Investment advisory services offered through Stonecrop Wealth Advisors, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission.




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