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| PE RATIOS COMING BACK TO EARTH: The price earnings ratio is calculated by dividing a company’s stock price by it’s earnings per share. It is one of the most widely-used valuation metrics for stocks. The PE ratio for the S&P 500 divides the index by reported earnings of the trailing 12 months. The median PE ratio for the S&P 500 for the history of that index is approximately 16. Since the early 1990s, the PE ratio for the S&P 500 has been running consistently higher than its historic median with brief exceptions in 1995 and during and for a brief period after the financial crisis. It is now down to about 18, about where it was 8 years ago. (Source: longtermtrends.net/sp500-price-earnings-shiller-pe-ratio/) |
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| STRONG WEEK FOR U.S. STOCKS: The stock market has been anything but consistent of late. Last week stocks roared ahead. This tends to happen any time there is the slightest hint of optimism about the slowing of the Fed’s raising of interest rates. All observers believe that the Fed will raise its Fed Funds Rate by another 0.75% again during their November 1-2 meetings. But individuals at the Fed are beginning to openly discuss slowing the pace of increases beginning at the Fed’s late December meetings. In addition, several banks reported their quarterly earnings with better-than-expected results. Overall, however, earnings reports are mixed. Finally, the labor market still shows signs of strength and resilience. |
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| LONGER-TERM PERFORMANCE: Below are the annualized three-year and five-year numbers for these same indices. |
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| SALES OF EXISTING HOMES DECREASES: In September, sales of existing homes in the U.S. decreased by 1.5% from August. This is the eighth consecutive month of declines. September sales were 23.8% lower than September of 2021. The median home price in the U.S. in September was $384,000, an 8.4% jump from September of one year ago. September marked the 127th consecutive month of year-over-year increases, the longest such streak on record. |
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| NORMALIZING INVENTORIES SHOULD HELP TAME INFLATION: A lot of things need to happen to slow inflation. One such item seems to be normalizing. The dollar value of retailers’ inventories in August 2022 was up by 12% from January of 2022, while spending at retailers (excluding gasoline stations) was up less than 3%. American wholesalers’ inventories are up more than 14% since the beginning of the year while sales (excluding oil) have grown less than 4%. With the notable exception of auto dealers, inventories are looking a lot more like they did pre-pandemic. |
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| THE FEDERAL ESTATE TAX EXEMPTION INCREASES: The Federal Estate Tax comes with an exemption that keeps most estates free of the tax. That estate tax exemption increases with inflation, and next year the exemption will increase from $12.06 million per person to $12.92 million. Now, a married couple can shield close to $26 million from estate tax. The law that raised the exemption this high will expire in 2026, at which time the estate tax exemption (if Congress doesn’t act, a pretty good bet) will be cut approximately in half.
The limit on annual tax free gifts will increase from $16,000 to $17,000 in 2023. |
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| NERVOUS M.C.: On Thursday, I acted as master of ceremonies for the 35th annual Delaware Leadership Prayer Breakfast. I have been on the steering committee for several years, and this was the first time we have done it after a two year hiatus. After we all agreed to greenlight the event this year, the committee asked me to MC. Being in front of 500 people is not my most comfortable place, but it all went off well. My only substantive role was a two minute welcome to the event. For the remainder, I just handed the ball off. We had both Senators and the lone Congresswoman from Delaware at the podium with me. The speaker was Dr. Francis Collins, and the singer (with a fabulous voice) was Ashli Rice. I got to chat with Senator Chris Coons (who sat next to me), with whom I have shared conversations a few times now. It was good to see so many people in attendance. The one remark I did say in the opening that actually got spontaneous and unexpected applause was this:
“Since our last prayer breakfast (in 2019), if you’ve been watching broadcast or cable news, reading the newspaper, or perusing social media, you might find it hard to believe that a 500-person mix of Democrats, Republicans, and Independents can meet together, interact, and actually enjoy the experience. And yet here we all are, praying together and loving each other.”
Our nation needs more of these moments. |
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Our mission is to help you see the objective, find the path, and navigate past the obstacles to a more prosperous future.
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Douglas R. MacGray, J.D., C.F.P. ®
President
Stonecrop Wealth Advisors, LLC
Direct | Cell | Fax
(610) 628 4545
dmacgray@stonecropadvisors.com |
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| “The life of money-making is one undertaken under compulsion since wealth is not the good we are seeking and is merely useful for the sake of something else.” Aristotle
“Remember this: Whoever sows sparingly will also reap sparingly, and whoever sows generously will also reap generously.” II Corinthians 9:6 (NIV) |
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SOURCES:
STRONG WEEK FOR U.S. STOCKS: wsj.com/articles/global-stocks-markets-dow-update-10-21-2022 AND wsj.com/articles/fed-set-to-raise-rates-by-0-75-point-and-debate-size-of-future-hikes
SALES OF EXISTING HOMES DECREASES: calculatedrisk.substack.com/p/nar-existing-home-sales-decreased
NORMALIZING INVENTORIES SHOULD HELP TAME INFLATION: theovershoot.co/p/wages-prices-and-taming-us-inflation
THE FEDERAL ESTATE TAX EXEMPTION INCREASES: wsj.com/articles/irs-raises-estate-tax-threshold-to-12-92-million-for-2023 |
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| (c) 2022 A.D., Stonecrop Wealth Advisors, LLC, All Rights Reserved |
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*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. |
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Investment advisory services offered through Stonecrop Wealth Advisors, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission.
SDG
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