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| IN CASE YOU MISSED LAST WEEK: Due to a technical issue caused when we changed email servers, many of last week’s emails went to spam. We have fixed the issue (so I am told). If you never saw last week’s edition, you can either check your spam filter, or I have reproduced it at the end of this week’s edition. Just keep scrolling at the bottom of this one and you will see it. |
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| INFLATION FALLS ONLY SLIGHTLY: The Consumer Price Index (CPI) rose 0.4% in September after rising only 0.1% in August. Over the last twelve months, the CPI has risen by 8.2%. This is down from 8.3% in August and 9.2% in July. The so-called core inflation measurement, which the Fed pays close attention to, excludes food and energy because those two items are so volatile. Core inflation increased from 6.3% to 6.6%. This all but assured investors that the Fed will raise the Fed Funds rate by another 0.75% at their next meeting, dashing hopes that the Fed would begin to back off. Prices rose on housing, medical care, airline fares and other services. Core inflation has risen by 0.6% two months on a row. The CPI number was helped a good deal by a monthly drop in gasoline prices (a trend that seems to have reversed). The housing-cost indices make up 40% of the core index and tend to move slowly, since the leases that they are based on are typically negotiated once a year. That lag means housing costs could keep core inflation high for months to come, even though private-sector rent measures are declining. Prices for services keep rising driven in large part by higher labor costs. Prices for motor vehicle repair services rose 2.2% in September from the prior month. Veterinary services and daycare and preschool increased 2% last month |
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| BACK AND FORTH: The markets went down last week almost by exactly the same amount they went up the week before. This is a jittery market, even intra day. On Thursday, the Dow Jones Industrial Average dropped 500 points before rising 800. Ultimately, the market was doomed to end the week in the negative as the new, mostly disappointing inflation numbers dampened hope that the Fed will begin to back off its hawkish stance sooner rather than later. |
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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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| WHERE IS THIS HEADING?: Remember, economic and market forecasts are notoriously wrong, but they can still be somewhat helpful. Also remember that the investment markets and the economy do not follow the same pattern. Markets try to anticipate what the market will do in the future. Therefore, when we actually hit economic hard times, markets have often priced that in, and once investors feel that the worst will be over in the near future, markets rise. According to the Wall Street Journal survey of economists, the outcome with the strongest likelihood is that we have a recession in 2023 that lasts less than three quarters (the average post WWII recession in the U.S. has been 10.2 months). They expect the first and second quarter of 2023 to be much like the first two quarters of this year, slightly negative growth with a rebound occurring later in the year. They predict that the unemployment rate will go from 3.5% to about 4.7% by the end of next year. Economists surveyed on average expect home prices to decrease by 2.2%. There is nothing surprising about these predictions (which were a bit more rosy when the survey was conducted in July). |
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| SOCIAL SECURITY RECIPIENTS ARE GETTING A BIG RAISE: Because Social Security increases are adjusted each year to keep up with the cost of living, this year’s raise will be the biggest in 40 years. The Social Security Administration announced last week that next year the rates will be increased by 8.7%. This comes after the 5.9% increase last year. |
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U.S. RETAIL SALES DID NOT CHANGE IN SEPTEMBER: U.S. retail spending in September came in the same as the month before. September’s spending was 8.2% higher than September of 2021.
(Source: census.gov/retail/marts/www/marts_current.pdf) |
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| ADVISORY FEES: According to data collected by AdvisorHQ, below are the average fees charged by advisors on assets managed. How does your advisor stack up? |
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| BACK IN CHARLESTON: Deb and I made a quick trip to Charleston where I visited with clients in the area. We really enjoy this city. It is very walkable, and when you get too tired, you take a pedicab. We ended up watching the Phillies clinch their series while dining in the city. |
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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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| “Difficulties strengthen the mind, as labor does the body.” Lucius Annaeus Seneca
“If you falter in times of trouble, how small is your strength.” Proverbs 24:10 (NIV) |
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SOURCES:
INFLATION FALLS ONLY SLIGHTLY: bls.gov/news.release/cpi.nr0.htmAND wsj.com/articles/us-inflation-september-2022-consumer-price-index-11665628037
SOCIAL SECURITY RECIPIENTS ARE GETTING A BIG RAISE: cnbc.com/2022/10/13/social-security-cola-will-be-8point7percent-in-2023-highest-increase-in-40-years.html
ADVISORY FEES: (Source: advisoryhq.com/articles/financial-advisor-fees-wealth-managers-planners-and-fee-only-advisors/#Investment-Management-Fees
WHERE IS THIS HEADING?: wsj.com/articles/economists-now-expect-a-recession-job-losses-by-next-year-11665859869 |
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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.
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| LABOR MARKET GETS TIGHTER: In the first half of the year, the U.S. economy was adding jobs at an average of over 400,000 per month. In September, the economy added 263,000 new jobs, a strong number showing the continued health of the labor market, but not quite as strong as earlier in the year. The amount of Americans in the labor market decreased. The Labor Force Participation Rate moved from 62.3% to 62.4%. (How is this falling when employers are clamoring for help?) The unemployment rate decreased from 3.7% to 3.5%, the lowest it has been since 1969. Unfortunately, these numbers, while showing strength in the economy, made investors unhappy. Too much strength in the labor market will encourage the Fed to stay aggressive, and investors are looking forward to the Fed backing off a little. Optimism that the Fed will back off ebbed with this employment report.
I think we can say that the COVID-induced employment recession is over. |
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| PAY IS INCREASING BUT AT A SLOWER RATE: In September, average hourly earnings were 5% higher than a year before. Last month, the annual number was 5.2%. Wages were growing much faster in late 2021 and early 2022, but the pace has slowed. The number of job openings has declined from 11.9 million in March to 10.1 million today. Fewer job openings could hold down wage increases which would help to slow inflation growth. |
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| SQUEAKING OUT A POSITIVE FIRST WEEK IN THE FOURTH QUARTER: Early last week, investors were thinking that perhaps the markets have been oversold and perhaps the economic data is “just right” and the Fed will back off from their aggressive stance. Markets roared. Then they stopped, and on Friday, the employment report made it clear that the Fed will still believe it has work to do to cool this economy and tame inflation. The week still ended positive for both U.S. and international markets. |
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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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| WOULD YOU BELIEVE?: For roughly the past four months, the Russell 2000 (stocks in small cap U.S. companies) is positive by a solid 2.87%. The S&P 500 is almost break even. International stocks have struggled, down over 9%. Bonds are down 3.76% which means that 78% of this year’s negative outcomes for bonds happened between January and early June, and since then bonds are still negative but have moderated. This makes some sense because theoretically bonds don’t have as far to fall as stocks, and as they fall in value, and as interest rates rise, the income being earned on bonds is increasing. |
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| REGARDING THE BOND MARKET: Last week, we sent an 11-minute video (done by yours truly) to our clients titled “This Crazy Bond Market.” Click here if you want to check it out. |
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| THE FED: The Federal Reserve meets again on November 1-2. It is widely expected that they will increase the fed funds rate once again, and probably by another 0.75% up to 4.0%. Many expect that rate to be pushed above 4.5% in early 2023. Fed Chair Jerome Powell has stated that the Fed is not trying to cause a recession. But he has made it clear his eyes are open to the pain the Fed is causing. “I wish there was a painless way to do that. There isn’t.” |
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| THIS RECESSION INDICATOR IS NOT POINTING NEGATIVE YET: Usually, heavy truck sales decline sharply prior to a recession. In September, sales were solid, coming in at 504,000, unchanged from August, and up significantly from the 420,000 figure from September of last year. Heavy truck sales fell to 308,000 in May of 2020 when we were flattening the curve. |
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BEST COUNTRIES FOR RETIREMENT: Natixis keeps a “Global Retirement Index” based on ratings in health, finances in retirement, quality of life and material well-being. The highest possible score is 100. According to this survey, the highest score came in at 81. The top ten are:
- Norway
- Switzerland
- Iceland
- Ireland
- Australia
- New Zealand
- Luxembourg
- Netherlands
- Denmark
- Czech Republic
U.S. News ranks them differently using similar data points:
- New Zealand
- Switzerland
- Spain
- Portugal
- Australia
- Canada
- Luxembourg
- Italy
- Ireland
- Netherlands
Finally, according to the Expatra Global Retirement Survey:
- Portugal
- Spain
- Costa Rica
- Italy
- Greece
- France
- Cyprus
- North Cyprus
- Turkey
- Malta
This is obviously not an exact science. Not one country shows up in all three. |
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| THE BIG MOVE: Stonecrop Wealth Advisor’s Investment Director, and my son, Logan MacGray along with his wife and three children, moved into his new home last weekend. It is only about 4 miles from their first home, but has much more room for their family of five. The move, as is always the case, did not go off without a hitch. My wife and I ended up helping until about midnight when I ran out of gas. My two sons kept at it until about 3:00am. It is a great house, and I am happy for Logan and his young family. |
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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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| “Take care of your body as if you were going to live forever; and take care of your soul as if you were going to die tomorrow.” St. Augustine
“‘Put this money to work,’ he said, ‘until I get back.'” Luke 19:31 |
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SOURCES:
LABOR MARKET GETS TIGHTER: bls.gov/news.release/empsit.nr0.htm
THE FED: wsj.com/articles/feds-inflation-fight-has-some-economists-fearing-an-unnecessarily-deep-downturn-11665197755
PAY IS INCREASING BUT AT A SLOWER RATE: https://www.wsj.com/articles/september-jobs-report-shows-slower-wage-gains-11665170908
BEST COUNTRIES FOR RETIREMENT: im.natixis.com/intl/resources/2022-global-retirement-index-report-full AND
usnews.com/news/best-countries/best-countries-to-retire AND expatra.com/articles/living-abroad/best-countries-to-retire/
THIS RECESSION INDICATOR IS NOT POINTING NEGATIVE YET: calculatedriskblog.com/2022/10/heavy-truck-sales-up-20-year-over-year.html |
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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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