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March 2023 - Finally Over?
Is it finally over? Most of you will probably wonder if I’m talking about winter, floods and power outages or the Fed raising interest rates. Let’s hope it’s both, but I’m more confident in mother nature than I am with the Fed at this point. In largely policy (both Fed and Government) driven errors, I’ll remember this month’s market gyrations for a long time. In the aftermath of the pandemic, the Fed was driving an overheating economy at 150 miles per hour. When the federal government added trillions in spending to an out-of-control car, the Fed tried to jam on the brake pedal as hard as it could. For a variety of reasons, it took a while for the car to crash. This month it hit a wall as some banks through a combination of bad management and Silicon Valley hubris rocked the financial system. While economists like to be right, the bigger challenge is for the Fed is a communications challenge and issuing mixed signals. It's also clear from their forecasts and earnings outlooks that companies are still having a hard time predicting what effect the Fed's monetary policy tightening will have on the economy and profit margins. Remember that future earnings drive the stock market and uncertainty makes it difficult to predict the future.
This is a great look at the S&P 500 over the five years. It shows the daily price movement along with the 5 year moving average. What this tells me and what I preach in my newsletters is stay invested as markets do go up over time. The pendulum usually swings too far, but the long-term trend remains higher. Just be sure you are allocated appropriately to meet your goals.
The recent turmoil in markets also makes me more optimistic on the outlook for 2024 and if the Fed does keep rates up and the dollar weakens, then international assets look more attractive than domestic ones. If this banking crisis would have occurred later, we would have much higher rates making the upside cap on how tight policy will become is one of silver linings from this situation.
Americans are getting older, and the statistics are staggering. In less than two decades older Americans will outnumber children for the first time in US history. According to the US Census Bureau, by 2060, nearly one in four Americans will be 65 years and older, the number of 85-plus will triple, and the country will add a half million centenarians. The bigger challenge may be that there will be far fewer younger Americans to care for and support the elderly. This also questions the solvency of social security and the upmost importance on saving for yourself and not relying on the government for your retirement. We need to raise the retirement age and find ways to shore up the Social Security Fund. Here’s a look at the system and the coming reckoning.
A quick note regarding taxes. Given all the storms and flooding in California this year, taxpayers in emergency zones (most of the Bay Area) have been given an extension to file and pay taxes until October 16th. The tax extensions are nice, I just wish that California (and the Federal) Government would stop trying to raise already ridiculously high tax rates. Speaking of taxes and incomes, here’s a little snapshot looking at hear a 6-figure salary goes the furthest: After adjusting for federal and state taxes and adjusting for the cost of living, $100,000 goes further in Memphis, TN than any other major US city. Seven of the ten cities where $100,000 goes the furthest are in Texas, while the three cities where $100K gets the least bang for the buck are New York, Honolulu and San Francisco. (SOURCE: SMARTASSET)
Some links for you Spring Break travels: The Big Lebowski, an all-time cult favorite turned 25. Sick of winter yet? Here’s a look at California’s snow and rainy season. How many subscriptions do you have? Probably a lot more than you need. I’m paying more for my homeowner’s insurance – are you?
Please reach out with questions and enjoy the spring!