This 3rd Week of June 2022 Thoughts: We are going to need to be smart
Updated: Sep 23, 2022
The days of easy money are over. Oh my…does that mean you are going to need to be smart and know what you are doing?
10-Year Bond Yield Watch: 3.3318%
RATE WATCH: Schwab Value Advantage Money Market SWVXX 7-Day Yield: 1.163%! Schwab’s Money Market Funds: Money Market Yields are on the Rise
Please contact me immediately if your bank account number changes: I will need to update your Money Link instructions. When you need funds in your bank…we do not want delays.
Do not feel alone if you are feeling the market has gone below your comfort level. Watch this space for real talk, but also for the signs that we are closer markets bottoming.
Our Focus this week: Attached, Green Alpha Next Economy, NEXTX
RECESSION WATCH: Everyone is calling for a recession: they just differ about WHEN. Later in 2022? 2023? 202?. But today, NO…not based on the data we have, this week.
After months of tough news, is there good news to bolster our spirits? One piece of good news is that we can have confidence that our financial system, as a whole, is solid: this is NOT 2007. Banks passed the Fed’s annual stress tests, demonstrating strong capital levels that would enable them to continue lending even through a severe economic downturn. Banks have not been able to raise dividends…important as my focus is on owning stocks that will help you fund your lifestyle. Investors cannot look for banks to begin to raise dividends.
--The testing began after the 2008-2009 financial crisis and this year, the Fed tested how banks would do if unemployment rose to 10%, commercial real estate prices dropped 40%, home prices fell 28.5%, bond spreads widened, stocks fell 55%, and market volatility spiked.
--The results showed banks would still be above their minimum capital requirements even if they collectively faced hypothetical loan and trading losses of $612 billion. The 34 banks tested included Goldman Sachs, JPMorgan Chase, and Wells Fargo.
--The Fed made this year’s test harder than last year’s. The central bank temporarily prevented stock buybacks and capped dividend payouts in 2020 as the pandemic took hold, lifting those restrictions last year.
--Given the uncertainty in the current market climate, with interest rates rising and the cooling housing market, analysts expect share buybacks could be more limited than in recent years as banks use more caution.
What’s Next: While the Fed’s decisions were released on Thursday, banks must wait until June 26 to reveal their dividend and buyback plans as well as confirm the size of their stress capital buffers.
Here is a look at every recession since WWII. This table shows the S&P 500 returns in the 6 months leading up to the recession, during the actual recession itself and then one, three, five years and ten years from the end of the recession: we may be getting close to the end of the worst of it!
😊Why does this matter to you? Think of recessions as winter: they will always come; there is nothing wrong. We just need to be prepared. more on timing-a-recession-vs-timing-the-stock-market
The Case For Bonds: Bonds have been a drag on returns this year, but the good news is that today, yields are much higher than they were during the onset of the pandemic. (Wealth of Common Sense)
😊Why does this matter to you? This has been the toughest year for bonds, EVER, but they won’t be down forever. Look below, in the Return Column since 1977: bonds have been a part of reducing volatility and providing income. So, while cash has been King this year, we will not make the mistake of staying in cash for very long…or moving to CDs. Cash will drag down returns, long term.
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.