National Immunization Awareness Month (NIAM) is the entire month of August each year.
With the purpose to promote the importance of immunizations and raise awareness about the benefits of vaccination for people of all ages.
Visit the CDC for more information on National Immunization Awareness Month.
“If you really look closely, most overnight successes took a long time.” – Steve Jobs
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five- and 10- year returns are annualized excluding dividends. Interest Rates: Federal Reserve, Mortgage Bankers Association.
MARKET HEAT MAP
The health of the U.S. economy is a key driver of long-term returns in the stock market. Below, we grade key economic conditions that we believe are of particular importance to investors.
The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.
Tune in Wednesday, 6 PM “Your Financial Choices” on WDIY 88.1FM. Laurie will be discussing: Part 2 – Retirement Funding and Pension Options, Continued.
Questions can be submitted at yourfinancialchoices.com during or in advance of the live show. Recordings of past shows are available to listen or download at both yourfinancialchoices.com and wdiy.org.
Week by week, the mythical “Goldilocks” scenario plays out, where the Fed tackles rampant inflation with higher interest rates and slows the economy as a result, but not so much so that we roll into a recession – this is also commonly called a “soft-landing,” and Fed Chairman Jay Powell, like others, is seeking this outcome. All the while, equity markets continue to quietly move higher as they did last week, with gains across all three major market indexes. For the week, the Dow Jones Industrial Average gained +0.7%, the S&P 500 Index added +1.0%, and the NASDAQ notched a gain of +2.0%. Year-to-date gains remain comfortably solid, with the Dow Jones Industrial Average at +8.2%, the S&P 500 Index at +20.5%, and the tech-heavy NASDAQ at +37.4% for the year.
US Economy
Last week we showed how inflation has moved from 9.1% in July 2022 to just under 3% a year later. This sharp drop in inflation is a direct result of the Federal Reserve raising interest rates from a range of 0.00-0.25% to 5.25%-5.50% in just under 18 months. A move this fast and this steep in interest rates, which immediately inverted the yield curve, typically slows the economy so much that a recession is the result. We at TWC have consistently stood against this typical pattern this year. Our premise was based on a solid labor market as evidenced by an unemployment rate at a paltry 3.6%, healthy consumer spending, banks continuing to lend with healthy balance sheets, corporate earnings still in the green column, and the US housing market still growing.
Markets continue to rally, seeing beyond the short-term concerns and instead looking ahead and understanding the fundamentals driving prices higher: we are near the end of the interest rate hikes, inflation is abating, and economic growth is accelerating rather than slowing. Last week, the Atlanta Fed raised second-quarter US GDP (Gross Domestic Product) estimates to +2.4% from +2.0%. See Chart 1 belowfromtheFederalReserveBankofSt. Louis, showingtheU.S. GDPestimate. The third quarter 2023 estimate for US GDP growth is +3.5%. Fed Chairman Jay Powell certainly seems to be getting his “Goldilocks” ending.
Policy and Politics
Washington is thankfully on vacation until after Labor Day so we can relax and not worry that new restrictive legislation will be dumped on consumers or corporations. Instead, we have a quiet period where the markets and economy will digest the news cycle this week, including earnings reports from some of the most important companies, including Apple and Amazon.com. Other important global news is coming from China, where further government stimulus was announced.
What to Watch
The “Goldilocks” scenario certainly is plausible, and last week we saw positive GDP growth along with declining inflation. All the while, companies continue to report favorable earnings, and the buzzwords of the future remain “artificial intelligence,” or AI. AI is supposedly turning out to be the panacea of everything that is wrong with the world, from healthcare to education to global climate change. We at VNFA remain cautiously optimistic about the economy and the financial markets, basing our assumptions on the American Consumer. Volatility remains calm, and Mr. Powell may get his soft landing, but vigilance and caution should always be used. Reach out to anyone at Valley National Financial Advisors for assistance.
Did you miss it? Chief Investment Officer, William Henderson, gave a quick update after the Fed announcement. Watch Now
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five- and 10- year returns are annualized excluding dividends. Interest Rates: Federal Reserve, Mortgage Bankers Association.
MARKET HEAT MAP
The health of the U.S. economy is a key driver of long-term returns in the stock market. Below, we grade key economic conditions that we believe are of particular importance to investors.
The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.
“In the middle of difficulty lies opportunity” —Albert Einstein
Tune in Wednesday, 6 PM “Your Financial Choices” on WDIY 88.1FM. Laurie will be discussing: Retirement Funding and Pension Options.
Questions can be submitted at yourfinancialchoices.com during or in advance of the live show. Recordings of past shows are available to listen or download at both yourfinancialchoices.com and wdiy.org.
Equity markets posted mixed results last week, with the Dow Jones Industrial Average notching a +2.08% return, the S&P 500 Index moving higher by +0.69%, and the NASDAQ Index trailing the broader markets with a –0.57% return for the week. The broadening in equity market returns beyond simply technology stocks has continued for several weeks. This move has been expected as better valuations existed outside of the “magnificent seven” tech stocks that have thus far carried most of the gains in 2023. Year-to-date returns remain indicative of their expected risk levels, with the Dow Jones Industrial Average at +7.54%, the S&P 500 Index at +19.24%, and the tech-heavy NASDAQ at +34.69%. Fixed income markets were largely unchanged on the week, with the 10-year US Treasury Bond moving higher by three basis points to close the week at 3.84%.
Global Economy
The Federal Open Market Committee (FOMC) meets this week, and most analysts are expecting another +0.25% rate hike, which will put the Fed Funds rate at 5.50% from 0.00%-0.25% at the start of 2022. We expect the Fed will be winding down its recent aggressive rate hiking strategy, which was related to spiking inflation in the United States and elsewhere. See Chart 1 from Valley National Financial Advisors and Y Charts showing the Fed Funds Rate and the U.S. Inflation Rate. The recent U.S. Inflation reading was 2.97%, down from over 9.00% in July 2022, so the Fed’s strategy is clearly working, and their target inflation rate of 2.00% is finally within reach. Still, we expect the path to 2.00% will be lumpy, slower, and longer than the path from 9.00% to 3.00%.
U.S. Economy & Market Outlook
Washington is on break until after Labor Day, and that has historically been “good news” for the markets because lawmakers are away and, therefore, unable to impact markets with harmful policies or procedures negatively. After calling for a recession in 2023, as many economists and “market experts” did in 2022, that same group has now walked back their predictions and pushed off any recession or soft-landing until well into 2024. With that said the markets are now focusing on earnings. Thus far in 2023, corporate earnings have been healthy, but markets are forward-looking, and we expect new tailwinds for corporate earnings going forward. Tailwinds will include relief on expenses as inflation continues to abate, normal supply chain operation, and the end of further rate hikes by the Fed. For the past year, we have only had headwinds, and markets have held up well; tailwinds will bring new directions to the market, but again, expect volatility, as always.
What to Watch
Equity markets continue to move higher, and the recent broadening of positive returns to cyclical stocks from only technology stocks adds to the breadth the market was lacking. Certainly, our antennas remain active any time the markets move higher with such muted volatility. The current VIX (Volatility Index) is 14.0, a near-record low. 2008/09 VIX measured 81.0 and 76.0 at the peak of the Pandemic. Many investors spent the first half of 2023 on the sidelines waiting for the recession that would never impact the market. Meanwhile, markets have steadily moved higher all year, and new tailwinds have emerged for corporate earnings in the form of lower expenses and a clearer path from the Fed on interest rate moves. Emergent consumer technologies like AI (Artificial Intelligence) might further impact expenses. Though the eventual impact of AI is unknown, one must pay attention to innovation and its potential global importance.