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| SICKENING: The news out of The Ukraine is sickening. What has been occurring in Syria, Yemen and many other places in the world, has now come to Europe. While it has the potential to be of much greater impact on the global economy, it reminds us of the horror of war that has never escaped mankind. Kiev (or Kyiv), like many other thriving parts of the globe, was a place with much beauty, which we hope will return. |
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| STOCKS DECLINE ON CONCERNS ABOUT WAR-INDUCED IMPACT: Prior to the Russian invasion of The Ukraine, inflation had shaped up to be the biggest concern for the U.S. stock market. The war has exacerbated that concern. Commodities, especially energy related commodities, have seen sharp price increases. Investors in the futures markets on commodities are betting on continued increases. Prices for futures contracts for corn saw its biggest weekly gain since 2008 and Brent crude oil futures prices increased by 25% last week reaching its highest level since 2013. While the U.S. labor report was great news (see below), it did not overshadow concerns about the war and its impact. |
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THE U.S. LABOR MARKET DID GREAT IN FEBRUARY: Last month, the U.S. economy added 678,000 net new jobs. The unemployment rate is now down to 3.8%. As you can see below, we have not fully recovered all the jobs lost since the government shut downs, but we are getting close. Construction employment added 60,000 jobs and is now only 11,000 below pre-pandemic levels. Manufacturing added 36,000 jobs, but is still 178,000 below pre-pandemic levels. The worst hit sector, leisure and hospitality, added 179,000 jobs and is now at 81% of its February 2020 level, or 1.53 million less workers. The Labor Force Participation rate increased to 62.3% from 62.2% the month before. The rate for those 25-54 increased from 82.0% to 82.2%. This is still below pre-pandemic levels indicating that some workers in their prime working years have yet to return to the labor force.
(Source: bls.gov/news.release/empsit.nr0.htm) |
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| GEOPOLITICAL EVENTS AND MARKET IMPACT: When there is a major geopolitical event, such as Russia invading The Ukraine, what has been the impact on the stock market in the U.S.? Generally, the impact has been quite small. A recent analysis reviewed 22 geopolitical events from Pearl Harbor to the U.S. pulling out of Afghanistan. The analysis includes the Suez Crisis, the Munich Olympics, 9/11, the Kennedy Assassination and more. The average total drop in the S&P 500 (“total drawdown”) for these events has been 4.6%. The average amount of days it took to reach that bottom was 19.7 days, and it took an average of 43.2 days to recover. The worst was Pearl Harbor which saw a 19.8% drop. Other double digit events were North Korea invading South Korea in 1950 (-12.9%), Iraq’s invasion of Kuwait in 1990 (-16.9%), and the 9/11 attacks in the U.S. (-11.6%). |
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| ONE QUARTER OF ONE PERCENT: In testimony before the U.S. Congress last week, Federal Reserve Chair Jerome Powell stated, “I do think it will be appropriate to raise our target range for the federal funds rate at the March meeting in a couple of weeks. And I’m inclined to propose and support a 25-basis-point rate hike.” |
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| FIVE AND ONE HALF PERCENT: Last week, China announced its target for economic growth at 5.5%, its lowest level in a quarter century of economic planning. The government has purposely slowed down its property and technology sectors. On top of that are sluggish domestic consumer spending and geopolitical uncertainty. |
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| THREE POINT EIGHT/NINE PERCENT: The 30-year Mortgage Rate in the U.S. ended at 3.89% last week, a slight drop from 3.92% the prior week. Over roughly the last fifty years, the average has been 7.79%. (Source: YCharts.com) |
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| CONTINUING TO WATCH THE DATA: The amount of people dying in the U.S. who are COVID positive continues to plunge, down another 19% last week. Global deaths are following the same trend, down 17% last week. (Bottom graph below). (Source: worldometers.info/coronavirus) |
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| HOSPITALIZATIONS AND GLOBAL INFECTIONS: The amount of patients in U.S. hospitals who are COVID positive dropped another 29.9% last week. (see graph below). According to the World Health Organization, 99.5% of reported cases globally are now omicron and 0.3% are delta. None of the other worrying variants, including beta, gamma, lambda or mu, have been reported. (Sources: covid.cdc.gov/covid-data-tracker AND worldometers.info/coronavirus/ AND apnews.com/article/coronavirus-pandemic-business-health-pandemics-united-nations). |
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| FRIENDSHIP: Last week, I observed my annual tradition of skiing out west with a bunch of friends. This picture is actually missing two of our members who were off doing moguls (I avoid them if I can). We have been doing this trip for closing in on twenty years. |
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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
225 Wilmington-West Chester Pike; Suite 200
Chadds Ford, PA 19317
Direct | Cell | Fax
(610) 628 4545
dmacgray@stonecropadvisors.com |
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| “Only one things remains unchanged: contradictions between nations and states are still resolved not by words, but by missiles. Not by word. But by war.” Volodymyr Zelensky
“People who have wealth but lack understanding are like the beasts that perish.” Psalm 49:20 (NIV) |
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SOURCES:
GEOPOLITICAL EVENTS AND MARKET IMPACT: https://ritholtz.com/2022/02/markets-geopolitics-1941-2021/
ONE QUARTER OF ONE PERCENT: marketwatch.com/story/as-fed-signals-a-25-basis-point-hike-later-this-month-heres-what-that-means-for-your-credit-card-bill-savings-and-mortgage-repayments
FIVE AND ONE HALF PERCENT: wsj.com/articles/china-sets-gdp-growth-target-at-around-5-5-11646443312 |
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| (c) 2022 Douglas R. MacGray, 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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