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Writer's pictureDoug MacGray
Sep 226 min read

The Fed Acts, Stocks Wobble, and Waxahachie

September 22, 2024


DOWN COME THE RATES:  As anticipated, the Federal Reserve Bank lowered the federal funds rate last week. It was unclear whether they would lower it by 25 basis points (one quarter of a percent), or 50 basis points. My son Logan and I argued about it the day before.  He turned out to be right. The Fed lowered the rate by 50 basis points. In its announcement, the Fed stated:


"Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have slowed, and the unemployment rate has moved up but remains low. Inflation has made further progress toward the Committee's 2 percent objective but remains somewhat elevated.


"The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.


"In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/2 percentage point to 4-3/4 to 5 percent."


STOCKS WOBBLE AFTER FED DECISION:  We have been talking about a Fed rate cut for so long, that in the end the announcement was anticlimactic. There was some late suspense on 25 basis points or 50 basis points, but we all saw it coming. When it was announced, stocks roared ahead. Then on the same day, they collapsed and ended close to even. Then they stormed ahead, and pulled back. It will take time to see what the economic effect of the rate cut is, and what future rate cuts will do, and that is what will ultimately drive the markets.



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



FEDEX:  FedEx stock sank nearly 15% Friday morning after its earnings report which turned out worse than investors had expected. It reported $892 million in profits last quarter, about 24% lower than consensus predictions. FedEx also lowered its outlook for the coming year. FedEx is often looked to as a barometer for how the economy is doing. FedEx blamed poor performance on inflation-squeezed customers shifting away from priority shipping. FedEx also cited a "weaker industrial economy."


QUOTE:  I saw this in an article I was reading this week, and it was so good and succinct, that I am simply going to quote it:


"Chasing an arbitrary index and staying 100% invested in the equity market forces you to take on more risk than you may realize. Two major bear markets in the last decade have left many individuals further from retirement than planned.


"Retirement investing should focus on conservative, cautious growth to outpace inflation. Attempting to beat a random, arbitrary index with no connection to your personal financial goals is a risky game. Remember, in the market, there are no bulls or bears. There are only those who succeed in reaching their investment goals—and those who fail." -Tyler Durden


COMEBACK OF NUCLEAR POWER:  Constellation Energy Corp. plans to restart a Three Mile Island reactor by 2028. Why? Mostly because it has a pretty good customer. Microsoft has committed to a 20-year energy purchase, its first dedicated 100% nuclear energy deal. AI is a huge energy consumer, and as that part of the economy grows, the need for electricity will increase. According to Constellation CEO, "There's no version of the future of this country that doesn't rely on these nuclear assets." Microsoft is focused on powering its global data centers with clean energy. It spent over $50 billion on data-center expansion last year and expects to exceed that this year. 


CHINA'S SLOWDOWN HURTING JAPAN:  Toyota, Honda and Nissan all announced production cuts as sales slump in China. China's slumping housing market is causing an overall slowdown and China is "encouraging" sales of Chinese made electric vehicles. Toyota has slowed down production in one of its Chinese plants and Nissan shut one down completely. Japan's exports of vehicles to China in August were down by 31% from a year earlier. So far this quarter, Japanese auto company stocks are down 17%. 


HOW DID I GET ON THIS LIST?:  I'd like to think I'm a pretty successful business person after all these years. But somehow I got on a mailing list that indicates more "success" than is true. Here is the email I got this week:


Are you currently flying private, or want to? If so, I'd be happy to send you pricing for your common travel routes or any upcoming trips under our Jet Card Program.


Our newly updated program offers the following incentives:

  • Guaranteed access to over 105 aircraft fleet (light to heavy jets)

  • Guaranteed recovery with no additional charges

  • No blackout dates or peak day surcharges

  • Hourly rate discounts ranging from 1% to 5%

  • Long haul discounts of up to 25%

If you are interested in learning more, let me know what time would work best for a quick call this week.


Best,

Hannah​


At least for the foreseeable future, I'll be paying a little extra to get exit row seats in the coach section of commercial flights. I don't think private jets are in my near future.


SEPTEMBER:  I kind of like September, but what I don't like about it is that it portends that winter is coming. It is always a month where we get a lot more activity, and this year is no different. Here are some lyrics that reference the month. Name the artist:


Do you remember, 21st of September.

  • Its late September and I really should be back at school.

  • September girls do so much

  • September morn.  We danced until the night became a brand new day.

  • Pale September, I wore the time like a dress that year


Answers at the end.


SALES OF EXISTING HOMES DECREASE: In August, sales of existing homes were down 2.5% from the previous month, and were 4.2% less than August of 2023. 


BUT THERE ARE MORE HOMES TO CHOOSE FROM:  The inventory of existing homes for sale is increasing. There were 22.7% more existing homes for sale in August than there were in August of 2023.


ANOTHER WEEKEND, ANOTHER WEDDING:  I think we are finished with weddings for a while. We have currently come through a long season of children of friends getting married. This one was in Waxahachie, Texas. It was another wonderful event. The toasts were unusual in that they certainly had their share of comedy, but they were very, very serious, deep and heartfelt as well. These two are going into marriage with the benefit of being young, but grown up, and having friends that really care about them. Congratulations!



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


"The eyes are the windows of the soul, but the mouth is the door." Ulrich Zwingli


"Do not let any unwholesome talk come out of your mouths, but only what is helpful for building others up according to their needs, that it may benefit those who listen." Ephesians 4:29 (NIV)


SOURCES:


(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.


 

ANSWERS:

  • Do you remember, 21st of September. - Earth Wind and Fire

  • Its late September and I really should be back at school. - Rod Stewart

  • September girls do so much - Bangles

  • September morn. We danced until the night became a brand new day.- Neil Diamond

  • Pale September, I wore the time like a dress that year - Fiona Apple

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