This 3rd Week of August 2022 Thoughts: Imbalances don't last.
Updated: Sep 23, 2022
Fed Fund Watch: The Fed is expected to raise rates by 1.25% by the end of 2022. We have 3 more hikes ahead — all the way to a Fed Funds rate of 3.75%!
10-Year Yield: 2.68% last week, 2.98% this week. Time to buy bonds.
RATE WATCH: Schwab Value Advantage 7 Day-Yield is 1.47%. Expect a lag as rates move higher.
Cola Focus: it is now estimated that your Social Security benefit will go up by 11% for 2023.
I hope this is not an annoying exercise, but I promise you, after we finish, it will be much more clear, how the market works. You will also understand risk much better.
This heat map shows which stocks in the S & P 500 are up or down, for 2022. The size of the square also shows you how much each stock is worth. Attached is a list of all the stocks in the S & P 500 and you will see names you’ve heard about all your life. Is it curious to you that some squares are huge, and other small? The shocker is how “big” just a few companies are: MSFT (Microsoft); GOOG (Google); AAPL (Apple); META (Facebook); AMZN (Amazon) and TSLA (Tesla) are!
Look at the stocks above and then look at the blue squares on the next page: they show the relative size of the sectors in the S & P 500. If you are a “visual” person, like I am, this will make sense. Apple, at 7.42% is as big as the entire industrial sector. Really? This matters to you because companies that grow to a disproportionate size, like this, carry more risk. And as we know, risk is the 4-letter word that matters to all of us.
You have heard about the S & P 500 your entire adult life…but just what is it? In it, there are 11 sub-sectors, with tech being the largest and materials being the smallest. Check out the stocks in the attached list. How many companies do you know? Lots, I bet.
Why does this Matter to you? Look at that iPhone or iPad in your hand. REALLY? Is the company that makes these devices really worth more than our industrial sector and the entire real estate industry?
This info graphic gives me hope that the Climate and Health Bill signed this week won’t be inflationary: the green “bubbles” are credits and incentives for consumers to spend money, dollars that will turn up in GDP.
Why does this Matter to you? Business groups lobbied hard against the 15% minimum tax rate for large corporations like Google; JP Morgan and Facebook, claiming it would reduce economic growth. Wall Street analysts back this legislation and the companies that make more than $1 billion a year will now pay a minimum tax rate of 15% and 1% on stock buybacks. It is expected to reduce the federal deficit by an estimated $300 billion over the next decade. Reduce economic growth? I don’t think so!
Required Disclosures: Always read the fine print! This content reflects the opinions of Julie Skye and is subject to change without notice and is informational and entertainment purposes. 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.