top of page
Writer's pictureDoug MacGray
Oct 284 min read

A Step Back, Home Renovation, and YouTube Repairman

Updated: Oct 28

October 28, 2024


A STEP BACK:  With economic data continuing to make investors worry about whether the Fed will continue lowering rates, coupled with cautious commentary from the Fed, bond yields began to rise (meaning bond values decreased), which in turn caused a bit of a slump in stock trading. McDonalds suffered a setback due to an E. Coli outbreak with their quarter pounders.



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



PRIVATE EQUITY LIQUIDITY SLOWS:  What we generally report on here are the public markets. A great advantage of the public markets is liquidity. If you need cash, it is generally not difficult to sell your publicly traded investment. With private equity, you invest, hoping for a superior return, but you do not have liquidity. You have to wait for your investment to have a liquidity event, which can take years. In 2021, private equity funds distributed 29% of their funds, a very high percentage. By contrast, in the first half of 2024, the annual rate of distributions was 9%. Exits from these investments have been difficult because of the lower IPO (initial public offering) market, lower valuations of existing assets, and the higher cost of capital. Despite this current problem, demand for private equity continues to grow. 


HOME SALES:  The Fed's actions in raising rates to slow the economy and inflation has continued to hit the housing market hard. Sales of existing homes are currently going through their worst two year period since the 1990s. The rapid rise in rates exacerbated the already existing problem of low inventory. (Home building plunged after the financial crisis of 2008 and has not yet caught up.) Homeowners with low rate mortgages are reluctant to move and take on a higher mortgage interest rate. Home prices have remained elevated. Sales of new homes are rising, up 3.4% for the year. Inventory is creeping up which is providing some relief for buyers with not enough choices.


WATCH FOR A RESURGENCE IN HOME RENOVATIONS PROJECTS:  Lower interest rates, assuming they come, are a catalyst for many types of economic activity and shifts in market returns. In the home renovation market, homeowners are now sitting on a mountain of new home equity. Most are reluctant to take on a project at current interest rates. But if rates continue to decrease, even slowly, economists are expecting a wave of new home renovation projects after a bit of a slowdown. Such projects surged during the government shutdowns, plateaued, and have endured a mild slump of late.


HOTELS DOING A LITTLE BETTER THAN LAST YEAR:  In the week that ended October 19, hotels reported occupancy at a rate that is 1.6% better than last year. The average revenue per available room moved up to $119.01, 4.2% higher than a year ago.



NUCLEAR ENERGY DEALS WITH BIG TECH CONTINUE:  We have already reported deals by Microsoft and Alphabet (Google's parent company) to secure massive amounts of nuclear energy to power its future energy needs. Now Amazon has announced that it is collaborating with X-energy and Dominion Energy to develop new nuclear reactors in Virginia and Washington state. The International Energy Agency estimates that global energy consumption from data centers could more than double their 2022 rates by 2026. Amazon invests heavily in solar and wind already, but is now diving into nuclear for its future (near future) energy needs.


PHARMACIES ARE HURTING:  Rite Aid is down to about 1,300 locations after filing for bankruptcy. CVS is finishing up a plan to close 900 stores. Now Walgreens has announced plans to close around 1,200 stores. Pharmacies have been challenged by theft, rising costs and competition from online retailers.


THE YOUTUBE REPAIRMAN: We bought a fairly high-end brand name dishwasher a few years ago, and it is giving us some problems. Recently a warning signal showed on the display and it was leaking a little. We called a repair person. He came. After my wife described the problem, he said he would work on it, and my wife went to the next room while he worked on it. After his initial examination, she heard him bring up Youtube and he began listening to a video explaining how to fix the problem. At the end of the video, she heard advice to stop using pods and use liquid soap. When he finished "fixing' the dishwasher, he called Deb in, explained what he did, and told her to try using liquid soap. After he left, we used the dishwasher, and the warning light came on and it leaked a little.


Have a great week!


Our purpose is to honor God by helping our clients see the objective, find the path, and navigate past the obstacles to a more prosperous future.



Douglas R. MacGray, J.D., C.F.P. ®

President

Stonecrop Wealth Advisors, LLC

Direct | Cell | Fax

(610) 628 4545


"If you don’t vote, you lose the right to complain.” George Carlin


"Those who work their land will have abundant food, but those who chase fantasies have no sense."  Proverbs 12:11


SOURCES:

PRIVATE EQUITY LIQUIDITY SLOWS: https://www.goldmansachs.com/insights

NUCLEAR ENERGY DEALS WITH BIG TECH CONTINUE: https://gritcap.io/p/netflix-s-335-comeback


(c) 2024 A.D., Stonecrop Wealth Advisors, LLC, All Rights Reserved


Investment advisory services offered through Stonecrop Wealth Advisors, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission. 


SDG


*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.

12 views0 comments

Kommentarer

bottom of page