China, the Greenback, and "Get Out!"

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September 10, 2023

A BAD WEEK IN CHINA: China is the world’s second largest economy, so what it does affects all economies of the world. Economic news from China was negative in a couple of respects this week. First, for the fourth month in a row, exports from China to the rest of the world decreased. China’s outbound shipments declined 8.8% in August from a year earlier. Second, China declared that iPhones are now banned for government workers. This dramatic step was taken in furtherance of its goal to reduce reliance on foreign technology, or so it says. In the near future, expect to see the name “Country Gardens” in the news. That is China’s top private real estate developer, a massive company that warded off default last week, but is far from out of trouble.

TECH STOCKS LEAD TO A NEGATIVE WEEK: When China announced its ban on the use of iPhones for government employees, tech stocks decreased sharply. This lead to a negative week for stocks overall. Nvidia and Apple both decreased more than 6% for the week. These two companies have had an outsized influence on the S&P 500 in 2023.

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

HEAVY TRUCK SALES SOLID: Usually, sales of heavy trucks in the U.S. decrease sharply before a recession. Heavy truck sales in August were down slightly from the prior month. But August sales were up 2% from August 2022.

ECONOMIC GROWTH; We are approaching the end of the third quarter of 2023, the year that many predicted would bring a recession. Currently, Bank of America and Goldman Sachs are both projecting that third quarter growth in the gross domestic product (GDP) in the U.S. will be 3.1% (annualized).

IMPACT OF HIGHER INTEREST RATES: The impact of higher interest rates takes a while to show itself. The Fed’ has been trying to slow things down, and thus tame inflation. The Fed’s actions will be a drag on the economy for a bit. We seem to be seeing the beginnings of the lagging impact, but expect more. Of course the Fed is trying to tame inflation without creating a recession. One area where the impact is large is the United States government’s burgeoning federal deficit. The cost of maintaining that deficit, now that the interest it must pay on the debt, is increasing.

LABOR MARKET STILL STRONG, BUT NOT AS STRONG: A year ago, the memorable statistic was that there were two jobs for every one job seeker. Overall job openings peaked at 12 million in March 2022 at that two-for-one ratio. That gap has narrowed, but it is still indicative of a strong labor market. Job openings in July were 8.8 million compared with 5.8 million unemployed. Demand for labor has eased, but it is still strong.

THE ALMIGHTY DOLLAR: With a resilient economy and a hawkish central bank, the U.S. currency is growing stronger again. Central banks in Japan and China have not been raising rates, and Europe has been a bit behind the U.S. The result is that since mid-July, the greenback has been climbing in value versus many other major currencies once again.

CREEPY: I think I have seen too many scary movies. Deb and I stayed at a bed and breakfast this weekend. I’m actually typing this email from a room in the place. Below are some random pictures. It is an old house that reminds me of many of those movies. So far, no apparitions, and if you see MacGray Matter again next week, you’ll know I made it out of here alive.

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

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(610) 628 4545

“There isn’t time, so brief is life, for bickerings, apologies, heartburnings, callings to account. There is only time for loving, and but an instant, so to speak, for that.” Mark Twain

“Let no debt remain outstanding, except the continuing debt to love one another.” Romans 13:8


(c) 2023 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 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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    Doug MacGray

  • DATE

    September 11, 2023


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