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| THE ECONOMY TOOK A STEP BACK IN THE FIRST QUARTER: The U.S. economy, as measured by Gross Domestic Product (GDP), declined in the first quarter by a 1.4% annual rate. In the fourth quarter of 2021 the economy grew at a rate of 6.9%. One data point that causes the GDP to go backwards is a trade deficit. In the first quarter, imports to the U.S. surged and exports fell, largely supply chain related. Also, in the second half of 2021, businesses bulked up their inventories for fears of continued supply chain issues. This slowed in the first quarter, pushing growth statistics down. Finally, government stimulus slowed significantly which lowers GDP. Most economists believe growth will resume in the second quarter citing consumer spending (which rose 2.7% in the first quarter) and business spending (which rose 9.2% in the first quarter and investment in equipment increased by 15.3%) as well as the temporary nature of some of the factors that led to the first quarter numbers (percentages are annualized rates). |
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| THE SITUATION IN CHINA IS NOT HELPING: China’s government is using a zero-tolerance approach to COVID, locking down entire cities when the highly contagious Omicron variant surfaces. This has sharply slowed Chinese manufacturing activity to its lowest levels since early 2020. |
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| TECH STOCK BLUES: Stock prices were led downward once again by tech stocks. Many of these stocks are on the NASDAQ and the NASDAQ Composite index just recorded its worst month in over a decade, swooning 4.2% on Friday, and down more than 13% in April. The S&P 500 recorded a negative 8.8% month. Netflix dropped 49% in April and PayPal Holdings declined 24%. Amazon fell 14% on Friday as it posted its first quarterly loss in seven years. The one bright spot in tech was Twitter which jumped 27% in April. Fears of the impact of inflation and higher interest rates on these companies, and then momentum caused by fear selling, has caused this poor performing month. Investors will continue watching key economic data to see whether this recent sell-off is overdone. |
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SPEAKING OF ECONOMIC DATA: According to the U.S. Bureau of Economic Analysis, personal income continued to increase in March, up 0.5%. Spending, or personal consumption expenditures (PCE), increased by 1.1%. PCE is up by 6.6% from a year ago. As you can see below, PCE continues to trend upwards despite the current inflation challenges. It is the sustainability of this trend that is the concern. The dashed red lines are the quarterly levels of real (inflation adjusted) PCE. (Thanks to our friends at CalculatedRiskBlog.com for this graph).
(Source: bea.gov/news/2022/personal-income-and-outlays-march-2022) |
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LABOR MARKET REMAINS TIGHT: In the week ending April 23, 180,000 new claims for unemployment were filed, a decrease of 5,000 from the week before. This remains in very, very low territory.
(Source: dol.gov/ui/data.pdf) |
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| COMPENSATION INCREASES: Employers, both private and government, spent 4.5% more on worker costs in the first quarter compared with a year earlier. This comes on the heels of 4% growth in the fourth quarter of 2021. |
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| RUSSIA SANCTIONS CONTINUE TO TAKE HOLD: South Korea just published its recent report of imports and exports by country. In total, South Korea’s exports to all trading partners increased by about 18% to $64 billion. But, exports to Russia plunged by 62% compared to the pre-invasion level. |
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| BITCOIN TAXATION: Bitcoin and other cryptocurrencies, are taxable. According to the IRS, bitcoin is property, not currency. What does that mean practically? Think about your use of dollars. You go to the ATM and get $100 bill, and put it on your dresser. A month later, the U.S. dollar has appreciated by 5%. You then use that $100 to buy something. There are no tax issues with that transaction. What if you get $100 worth of bitcoin and it doubles in value? You then use the $200 worth of bitcoin to purchase something. You have to report a $100 capital gain on your taxes! |
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| CHECKING UP ON YOUR FINANCIAL ADVISOR: The Securities and Exchange Commission (SEC) regulates registered investment advisors. For the benefit of the public, they keep a site where you can quickly and easily do a quick check on your advisor or someone who you are thinking of hiring. The SEC site is found here. If the financial professional works for a broker/dealer (as a registered representative) the Financial Industry Regulatory Authority (FINRA) maintains a site with a database on all such individuals and firms. The FINRA site is found here. Try it out. Go to the site(s) and type in the name of your financial advisor. First, make sure they are in the database. You can search by firm name or individual name. If you type in “MacGray” you will find only my name and Logan MacGray. (Evidently, “MacGray” is not a common name in this industry.) If you click on the name, it will take you to a page that gives background on experience, exams passed, etc. The first thing you will see is a little box called “Disclosures” and a number. If the number is not zero, click on it and read the disclosure(s). Having a disclosure should not eliminate the advisor from your trust, necessarily. Obviously, the amount and severity of the disclosures are important factors. The longer an advisor has been in the business, the more likely it is that the advisor will have a customer complaint, dispute, regulatory penalty, or litigation that will have to be disclosed. For example, after the 2008 crash, there were lots of complaints that now show up as disclosures for a lot of advisors who were working back then. What you should do with any disclosure is ask your advisor about it, and make sure you are comfortable with the explanation. |
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CONTINUING TO WATCH THE DATA: The number of people dying in the U.S. and in the world who are COVID positive continues to plunge. U.S. deaths dropped another 21% after a 22% drop the prior week! World deaths were also down by 7%. (World data on bottom graph below).
(Source: worldometers.info/coronavirus) |
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| HOSPITALIZATIONS: The number of patients in U.S. hospitals who are COVID positive increased from a little below 10,000 to a little below 11,000, so up nearly 10%. The amount of people in ICU beds in the U.S. who are COVID positive increased to 2,014 from 1,901, still close to the record low, but an increase nonetheless. (Sources: covid.cdc.gov/covid-data-tracker AND worldometers.info/coronavirus/ AND coronavirus.jhu.edu/data/hospitalization-7-day-trend). |
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TURNING IT OFF: I love my watch. It tracks my steps, and gives me all the data I need when I go for a run. It is connected to my phone, and lets me know when I’ve received a text, or when my phone is ringing. I’ve decided I don’t like this. Even when I am trying to ignore my phone and pay attention to whom I am with, the vibrating watch distracts me. So I have started a habit of shutting my phone off more often. Are you too distracted by your phone? In an article I just read, the author said to test yourself by asking at the end of the day.
- What did we eat and discuss at breakfast?
- What do you remember about the conversations with your spouse and kids?
If you are not remembering immediately, you may be in phone zombie mode. “Wake up and snap out of it.” Listen. Pay attention. Participate. I once heard it said about an individual, in a very complimentary comment, “In the midst of a crowd, he made me feel like I was the only one in the room.” Do people say that about you? Cultivate that trait. But you may have to turn off your phone to accomplish it. |
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| TAKE YOUR KID TO WORK DAY: Well, it was “take-your-kid-to-work day” last week. One of my “kids” works for me, so every day is take-your-kid-to-work day. But he brought his kids to work, and they proceeded to turn it into “wrestle-with-Big-Papi day.” |
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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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| “Live as if you were to die tomorrow. Learn as if you were to live forever.” Bobi Wine
“There is nothing better for a person than to enjoy their work.” Ecclesiastes 4:11 |
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SOURCES:
TECH STOCK BLUES: wsj.com/articles/global-stocks-markets-dow-update
THE ECONOMY TOOK A STEP BACK IN THE FIRST QUARTER: wsj.com/articles/us-economy-gdp-growth-q1 AND bea.gov/news/2022/gross-domestic-product-first-quarter-2022-advance-estimate
COMPENSATION INCREASES: wsj.com/articles/us-employers-labor-costs-inflation-q1-2022
THE SITUATION IN CHINA IS NOT HELPING: wsj.com/articles/chinas-manufacturing-activity-contracted-further-in-april
RUSSIA SANCTIONS CONTINUE TO TAKE HOLD: theovershoot.co/p/korean-exports-to-russia-have-collapsed
BITCOIN TAXATION: money.usnews.com/investing/cryptocurrency/articles/how-bitcoin-is-taxed
TURNING IT OFF: spilledcoffee.substack.com/p/being-present |
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| (c) 2022 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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