Special Market Alerts are generally undesirable to write. That’s because we never intend to raise alarm or create uncertainty. How should investors think about the first 10% correction of this new bull market? Certainly a correction was due following 23 months since the March 23, 2020 bear market bottom. From that time, the S&P500 jumped +121.1% to its last closing high on January 3, 2022 without even a 5% pullback. Since early January, investors ramped-up their worry about everything – sticky inflation at +7.6% (highest pace in 40 years); persistent supply and demand mismatches for products, services, and workers, creating shortages. When demand is greater than supply, prices will rise. In fact, someone said “Inflation is an economic problem, and also a psychological proxy for things being out of control.”
There’s Plenty More – February Commentary
We occasionally hear this idiom: “There is more where that came from.” It can be used in a negative, combative sense or in a positive, generous way. The statement may be offered to a belligerent child – “if you do not shape up, there’s more to come.” Alternatively, where there is strong achievement more success often follows. In both cases the meaning is the same: there is a reservoir just waiting to be tapped if needed. Another famous statement: “the barrel is only half full; or the glass is half empty.” As we pass through 2022, will there be more market advance (from which it came), or are investors expecting the success to evaporate? Is the longer market up-trend still viable, or are the short term worries about “everything” (inflation, interest rates, Russia/China/North Korea, oil, COVID variants and living life again) emptying investor sentiment? How much more is to come – plenty more (of what)?!
“Lowdown on 2021” and the “Journey into ’22” – Nvest Nsights Q4 Newsletter
Happy New Year! 2021 provided a second, actually a third, consecutive year of double-digit investment returns for stocks (most forget 2019 because of how quickly the mood soured in early 2020).
This edition of our quarterly newsletter, Nvest Nsignts provides “the lowdown” on what themes drove the financial markets during 2021. Perhaps of greater interest is our sharing of what we believe will be the biggest focus for investors as we “Journey into 2022“. Our personal finance focus this quarter, “Healthy Habits” shares several easy-to-implement “resolutions” that can pack a powerful punch to enhance your long-term financial posture as you set plans for the New Year.
A printer-friendly version of the full quarterly newsletter, including benchmarking and fund performance data, can be obtained here: Q4 Nvest Nsights
As always, please do not hesitate to let us know if you have any questions or would like to coordinate a time to visit.Continue reading
Healthy Habits
Are you setting New Year’s resolutions in pursuit of being a better version of you? Health and finance are two common areas of resolution focus. When it comes to being healthy, people often resolve to sit less (move more), eat more nutritious foods, and of course exercise. On the personal finance side, the most common ideas are to spend less and/or save more. Sounds simple, but how can we make the resolution more intentional and enhance the probability of success… and your long-term financial “journey”?
Ketchup Bottle Economy – December Commentary
Getting ketchup from its bottle is often messy. It never wants to flow easily. The container must be shaken vigorously, or squeezed a lot to find that it still does not come out. Eventually after enough frustration and squeezing, ketchup will flow – often after it explodes with too much red sauce going everywhere. This month, title alternatives were “Ate Way Too Much” (at Thanksgiving), or “Monster Snow Storm” is brewing. Both of these ideas relate to news/media sensationalizing new worries which then affect the financial markets. Following 20 months of market advance with only minor pullbacks, most any new “worry” can cause the market to feel “bloated”.
Peak “Stagflation” – November Commentary
What is Stagflation? Is the US economic environment traveling toward Stagflation? The percentage of news articles mentioning “stagflation” is nearly double (37%) the previous high readings which occurred in the midst of two prior recessions of 2008 and 2001 (both at 21% – see chart at bottom of article). The term stagflation combines two concepts – stagnation and inflation. This condition takes place when economic growth stalls (or stagnates) at the same time inflation is elevated (or rising). Accompanying stagflation is unhealthy levels of unemployment. It occurs when some force or condition increases the cost of production, such as an increase in oil prices (1970s) or a supply-chain disruption (2021) giving rise to the prospects of slowing or stalling economic growth and rising inflation (higher prices). A “supply-side shock” creates shortages of product (could be many products or materials), wherein the price of products rise quickly due to scarcity. Similar to the 1970s, unemployment and availability of workers (today) add to the challenge of slowing economic growth accompanied with rising prices (inflation). If this condition exists too long, it becomes “sticky”, and fighting or managing it becomes challenging.
“All of the Above” Multiple Choice Questions & Pivot Points – Nvest Nsights Q3 Newsletter
With the 3Q now complete but the stock market seemingly more choppy since September, investors wonder if the final 3 months of the year and 2022 might offer a resumption of upward trend. For most, it’s a difficult consideration amid the confluence of BIG Government-related issues ranging from significant spending and tax proposals (infrastructure and social programs), a potential government shutdown (debt ceiling), whether Fed Chair Powell will be reappointed, and more.
In this quarter’s update, “All of the Above” we review the reasons we see for the stock market losing momentum in recent months, September in particular. We also believe that the Great Lockdown response to COVID will be viewed as a “Pivot Point” in a variety of ways, but including how investors think about inflation, interest rates, and asset allocation. Related, September 30 marked the 40th anniversary of a secular bull market for bonds. What might the next 40 look like?
The personal finance discussion this quarter provides a quick summary of what we see are the most likely tax changes coming as a result of current proposals. As you might imagine, this is a topic arising in most every client conversation this year and we hope you find the quick bullet format helpful.
A printer-friendly version of the full quarterly newsletter, including benchmarking and fund performance data, can be obtained here: Q3 Nvest Nsights
(Tax) Change is in the Air
It is often said that there are just two certainties in life: Death and Taxes. Or how about “the only constant in life is change”? In 2021, it is hard to recall a client conversation where the topic of potential tax policy changes did not arise. Since COVID, government policy was all about huge stimulus and spending; as we shift our attention to the final quarter of 2021 and beyond, the conversation is increasingly about how all additional spending proposals will be paid for (via taxes – both corporate and personal).
Price Changes Everything – September Market Commentary
Why does price change everything? When product and service prices are rising, there is a point when buyers diminish. Economic value ceases to exist. That is, unless the item is very critical to meeting important needs, then higher prices know no upper bound. Take oil prices – rising too quickly curbs driving habits; some businesses tack on fuel surcharges. If the price rises too much, then alternative product or service choices may be pursued (again with oil prices – one seeks alternative transportation options – bus, fuel efficient car, or electric vehicle); or other competition enters the picture wherein more supply promotes prices to slide. Shortages can cause prices to rise, often in huge ways. Currently, shortages of computer chips exist because of supply chain and transportation challenges.
Check Engine Light is On – August Commentary
When your “check engine” light is displayed it usually means the car’s emissions control system is faulty and the vehicle is polluting the air beyond allowable federal standards. A vehicle with this condition would likely fail an emissions inspection. Common causes include a gasoline cap that is loose, oxygen or mass airflow sensor is bad, spark plugs may be caking with too much carbon buildup, spark plug wires are bad, or the catalytic converter is faulty (rare). You should not confuse the “check engine” light with the maintenance or service light; those signal a more immediate condition and should be promptly diagnosed.