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It's Just a Simple Waive

Happy Market Update!

Well, it’s football season again. Are you watching the UFL? Me neither. I forgot about it. But I might remember this weekend since my kiddo starts flag football again! Yes, there should be some good stories with this. Starting with tomorrow. It’s going to be rainy and 45 degrees. I call that football weather! 5 year olds don’t like it. Well, toughen up. Then we have the Metro District who doesn’t like the grass being torn up. So I’m guessing it’s a game time decision. Maybe I’ll make him run laps and practice plays in the cold rain. Thoughts? I mean just look at this gif. How does that not look fun?



And it builds character. Something that this country should be pushing a bit more, in my humble opinion. When did we decide that it was okay to stop waiving to people who let us merge our cars in to another lane? Did that start with the tinted windows? Or is it just that everyone is so self absorbed that they DESERVE to be in front of me? I’m a courteous driver, and I teach Jackson to do the same. This is also when he learns really bad words (that of course he is NOT allowed to say). Like, “Hey you piece of doo-doo, be kind and waive at me for letting you get in front of me just to drive slow!” You know, things like that. I don’t wear a lot of short sleeve shirts with buttons and ties, but if I did…this is what I would look like for sure.



But that’s not the only thing chapping my hide this morning. Jobs reports came out. And guess what? It’s stronger than expected….again. So are hourly earnings. Yes, it’s nice to make more money. But…

 

Not all inflation comes in the form of products. For example, with this morning’s job report, hourly earnings did tick up AND the revision from last month was up. Contrary to what your elected officials would have you believe, this WILL get passed on to you…not because these businesses are bad (as I’ve stated before), but because they want to stay in business. This is a good example of why I believe the Fed states “higher for longer” pushing out any rate cuts for summer.



Why is this a big deal? Let me introduce you to the State of California. Who could have seen this coming? Well, anyone who ever sat in math, worked for a business, understood how expenses flow through, the politicians who voted for this (the list goes on). If you google info about this, there are lists of companies shutting down and laying people off.  I’ve said this before, and it’s proving me correctly. If you raise costs, prices go up. Don’t think the politicians are that dumb. They know it, but they are pretending to help to get votes. Ultimately, it’s just a rat race. Perhaps they should actually do something to help other than make it worse and worse and worse.



Speaking of voting and economy, this Gallup poll indicates that for all age groups, the economy is a higher priority this election than the previous one. For another 4 months, I fall into the pink group…and yes, I would be part of that 43%. After the big 50, I will increase the blue from 28. I find it interesting that 65 and up do not consider this a top priority by more than 80%. Perhaps that’s because their 401ks have NVDA in it and they are retired? IF you’ve got the assets needed to retire from the largest bull run in history, then yeah, maybe you don’t care that things are ridiculously expensive. That, my friends, is why you see a HUGE increase in the 18-29 group. The amount of social media posts about this are almost astronomical. This just proves we vote on how things impact me…and not you. Right? It’s a shame because the amount of debt per person will need to be corrected by taxes and these younger people will suffer that. Let’s all vote to help them!



Why do I think the older generation isn’t too worried about it? Check out this chart I received from Eric Rosel, an amazing financial advisor, who showed this to me from JP Morgan. This shows that the total assets dwarf liabilities. And that’s what that poll shows. But Eric did bring up a good point. Does this look taxable? The assets? Yes. And my stomach turned.



This chart is coming in from our friend, NOD. From Heritage.org, this shows us that national debt increasing…and how we will need to be taxed to clear it in the future.


What about inflation from the Fed’s point of view? We had a lot of Fed speakers this week, and Powell did say he is still expecting rate cut this year (but is also seeing inflation rising…so I’ll take that with a grain of salt). But here are the forecasts from this week, prior to today’s higher job growth…which should make some of these shrink. I’m in the Mizuho camp…I think zero at this point. If the Fed sticks to their word, then we have no reason, based on the info we have so far this year, to think they will lower rates before 2025. Higher for longer.



Again, here is why I believe that. That red line is their target. While this chart does show things improving (at least moving down in slower inflation) since 2022, we are not yet at 2%. Increases in jobs and earnings, as well as producer good costs, does not indicate to me that this trend continues to 2%. But we shall see.






So that’s a lot about inflation and rates. I’m not saying that the economy is tanking (this time) or that it’s improving. I think we are in a holding pattern watching the info coming out daily to see what direction we are headed. But for now, things are going to cost more. I’m sorry.



10yr: This is not pretty. After a large move on Monday, after PCE reports from last Friday, we have been attempting to move above my line of resistance at 4.354. For the past 3 days, we closed below it. Today…we are again testing it. IF we close above it, that resistance line turns to support and that should mean higher rates. Things continue to be expensive, but this is the norm now.



MBS: Remember, higher means low rates. 3 of the 4 colored lines (moving averages) converged which forms resistance. We are still below it…and that means higher interest rates. Cars, homes, whatever…stay expensive. Your yield curves are still inverted. So everything is more expensive. Maybe save some money.



Hopefully you’ve got money saved and it’s growing in the Magnificent Seven Tech stocks. But even the market yesterday took a dive on some Fed speak. This back and forth will probably be a while. But the good news is that I believe that once the Fed does lower rates, the stock market should rally. The stock market does not make your life better…but it means that the future should be better. So hang in there. Hopefully this inflation gets under control. If it doesn’t, then you should be making money on what you are not spending (higher rates mean better money market account returns). I love me some compounding interest! Asset wise, anyway.

 

What doesn’t kill you, makes you stronger.

Tim


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