This 1st Week of November Thoughts
Fed Fund Watch: the 10-Year Note was 4.05 last week and is now 4.175%...after the FED raised rates by .75% on Wednesday. I’m reviewing portfolios for tax loss selling…to give you a bit of a break on April 15th. Please be sure I have your tax return so I know how to help you the most!
I will keep this RMD Countdown reminder here: it is not too late to reduce your tax bill by taking charitable contributions out of your IRA.
The Fed’s most forceful tightening campaign since the 1980s is beginning to cool some parts of the economy, particularly in housing. There has been no progress on inflation and unemployment is at a 50 year low of 3.5%. Employer demand for workers has also remained strong, with 1.9 job vacancies for every unemployed person in America. It is just too good out there for workers!
According to the Jefferies Trading Desk, (see the table below), the 10-year bond yield I talk about peaks 1 month (max of 4 months) before there is a pause in future rate hikes. The rates futures market expects a peak in May 2023 at 4.92%. We could be within months of a peak, and the pause. Time to add to your bonds.
Why it matters to you: These two charts above show what we might expect after the Fed Rate Raising cycle is done. The bond bear market will end: it is just is a matter of time. Once rate hikes stop then it is should just be a matter of time until the next recession begins or at least the economy slows significantly.
Soft landing or hard bounce? We won’t know for a while but we can take heart in the chart above that shows what our future might look like. There are different probabilities of positive returns if you think out 1; 3, 5 and 10 years and all are good news. The probability that stocks, bonds and then a balanced stock-bond portfolio will have a positive return is comfortably improving.
So, if you think that the debacle in the bond market has chased off the smart money, guess again: private investment purchases in U.S. Bonds are surging, while stock sells are picking up steam. This is NOT the time to be panicking and selling your bonds. Quite the opposite.
Why does it matter to you? There is a Rule of Thumb that works in every industry that has any kind of cycle: demand ALWAYS pushes prices up. We saw it in housing prices over the last 2 years and we’ve seen the opposite recently when mortgage rates increased: a lack of demand pulled the floor out from beneath stock and bond prices. There is another Rule of Thumb: follow the smart money: the smart money is buying bonds. Elon Musk's Biggest Mistake was bad for Twitter and worse for Tesla. Journalists first began writing about Tesla when Elon was the left-wing Californian hero, saving the Earth with his electric vehicles. He then re-invented himself as a right-wing Texan hero, promising to bring big government to its knees. April 2022 saw him setting out to free the voices of the people from the shackles of the Twitter censors. The ensuing Twitter lawsuit fiasco suggested that, in actuality, he's an opportunist whose word (even written word) is utterly unreliable. And now? Now needing to please the Chinese government, Twitter advertisers, and a wide spectrum of Twitter users, he finds himself walking a perilous tightrope. Why does it matter to you? Turn back the clock to 2018 when Tesla became heavily dependent upon the good graces of the Communist Chinese Party, which arranged a favorable land lease for Tesla's Shanghai factory and favorable financing for building and operating the factory. This is unprecedented for an automaker to have 100% foreign ownership. Today most of Tesla's profits come from China, and the Chinese Communist Party has its boot on Tesla's, and Musk's neck. It can press it down hard any time it wishes by decreeing that "special circumstances" have arisen that make it in the "public interest" to repossess, that the factory is failing to meet "relevant standards" and hence must cease operations. Alas, to Musk, merely being the guiding genius of Tesla was not enough. He had to fashion himself a free speech hero, too. The wondrous deeds of Musk in 2022 went far beyond the Twitter deal. He famously suggested that Ukraine make material concessions to Russia and followed that by suggesting Taiwan should become a "special administrative zone" of Communist China, much like Hong Kong, yet with the Chinese authorities somehow more liberal and benign. For Musk to own Twitter could well be the worst thing that ever happened to Tesla. Monitoring what's posted at a vitally important social media site is an exceedingly difficult business. It's uber hard work now and Musk might have met his Waterloo. I have no idea if Tesla or Twitter is a buy, today.
ulie Skye | 918-408-7981 | email@example.com
Required Disclosures: Always read the fine print! This content reflects the opinions of Julie Skye and is subject to change without notice. This content is for informational and entertainment purposes, and it is not a recommendation regarding the purchase or sale of any security. There is no guarantee that any statements, opinions, or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Securities investing involves risk, including the potential for loss of principal. There is no assurance any investment plan or strategy will be successful.
Julie is an Investment Advisor Representative of Sustainable Advisors Alliance, LLC (SAA, LLC): Advisory services are provided by SAA, LLC. Registration with the SEC does not imply a certain level of skill or training.