Germany and China Struggle, Russia Exporting Lots of Oil, and Three Blind Mice

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August 13, 2023

JULY INFLATION NUMBERS In July, the Consumer Price Index rose by 0.2% and the 12 month inflation number was 3.2%, up from 3.0%. The largest contributor to the increase was housing costs which rose 0.4%, accounting for 90% of the CPI increase. Core CPI, which excludes volatile food and energy prices, rose 0.2% from the prior month and 4.7% from a year ago. That is down from 4.8% last month. The Fed prefers the core CPI number. These numbers do not go against the overall belief that inflation is steadily easing and that the Fed will stop raising interest rates. By the way, those higher prices you are seeing at the gas pump came too late for July’s numbers, but they will show up in August.

STOCKS COOL OFF: U.S. stocks have been enjoying a summer rally, but for the second straight week, stock prices decreased. July’s inflation numbers introduced more uncertainty. Tech stocks, which are highly growth-oriented and are more sensitive to interest rates, fell more decisively. The NASDAQ Composite was down 0.7% for the week compared to the S&P 500 which only fell 0.27%.

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

OIL PRICES RISING: Inventories of U.S. oil have been declining for the past five months and are now at their lowest level since the beginning of the year. Concerns over supply are increasing prices, which we are seeing at the gasoline pump. Energy stocks and exploration and production firms and oil services companies are among the best performing sectors in the U.S. stock market so far this quarter.

CHINA STALLING: Consumer prices in China are lower than a year ago. Imports into China fell sharply in July, indicating week consumer demand at home. Exports also fell, indicating weaker global demand for Chinese goods. Demand for houses and cars fell in the first half of the year, the first time that has happened since they started measuring that data.

ENERGY SANCTIONS AGAINST RUSSIA: Exports of oil from Russia to India so far this year are eleven times higher than last year. Moscow began redirecting shipments of oil from Europe to Asia last year in response to sanctions. India has become one of Russia’s biggest consumers by not joining the sanctions. India has pledged to the West not to pay more than $60 per barrel for Russian crude oil.

IS THE LABOR MARKET SOFTENING?: Many large corporations are now requiring their employees to come back to the office including Farmers’ Insurance, Citigroup, Chipotle, Lyft, Disney, Google, Meta, and ironically, Zoom. Now Amazon is joining in requiring employees to be in the office at least three days per week. Tech companies have been the leaders in layoffs, and it appears that they feel they have more leverage to call the shots as they may want to shed more people anyway. Other companies may simply be 1) seeing data that remote work is not as productive, and 2) the labor market is not as tight, and it has more leverage than a year ago.

THE U.S. IS LEADING IN SINGLE PARENT HOUSEHOLDS: According to the Pew Research Center, using data from 2010-2018, 23% of U.S. children lived in single-parent homes. That is more than any other country in the world and triple the average for the rest of the world. According to the U.S. census bureau, in 2022, the number of children under the age of 18 living in a single-parent home was 31%. The Pew Data shows less than the Census Bureau because Pew only counted homes headed by single mothers, but it did not count those with single fathers. It gets worse. According to the CDC, 40% of America’s children in 2021 were born to unmarried women, and 41% were born to women whose primary source of payment for delivery was Medicaid.

GERMANY STRUGGLING: Germany, Europe’s largest economy, fell into a technical recession earlier this year. Its manufacturing sector has weakened. It is facing high inflation, and the war in Ukraine has hit the economy hard. At the same time, Germany is trying to decarbonize its energy production across many sectors of the economy, including its automotive industry, which is moving from combustion engines to electric. Add to this mix a deteriorating relationship with China, which happens to have a stranglehold on many needed components for electric vehicles and other green energy initiatives, and you have the recipe for a country that will struggle for a bit.

PRETTY COOL: This is a picture of four generations, my mother-in-law Shirley, her daughter and my wife Deb, our daughter Molly, and her daughter MacKenzie!

….AND SPEAKING OF THE NEXT GENERATION: I am pleased to be passing on a bit of cultural heritage down to the next generations. We watch our grandchildren from time to time, and I decided to introduce them to the artform of slapstick comedy, and in particular, the best ever at it, The Three Stooges. I was thrilled, the other day, when my granddaughter Lydia and grandson Judah asked if they could watch The Three Stooges! “Can we watch the one when they throw pies?” Music to my ears. I am a good influence.

BOOKS: Last week, I asked if you had a list of the five books that have been most influential in your life. I got an incredible response. The lists are so varied, but it has inspired me to read a few books I have never cracked open. The book repeated the most was the Bible, but after that, there was only one that was listed more than once, and that was the Lord of the Rings trilogy which was named twice. Books included fiction, historical fiction, old and new fiction, non-fiction books on philosophy, business and theology and children’s books.

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

“In Lahaina, the sugarcane grow, in Lahaina, the living is slow, in Lahaina, the mangoes are sweet.” Logins & Messina, Lahaina

“After all, children should not have to save up for their parents, but paraents for their children.” II Corinthians 12:14 (NIV)


(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

    August 14, 2023


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