When I was a child1, approximately every other month a large box would arrive to our home on the family farm. The box was filled with assorted types of Campbell’s soup– unfamiliar to the average shopper. On various days my mom would serve us a few of these soups as part of our lunch. Our job (a passel of siblings aged one to fourteen) was to rate or comment on each soup, which our mom would then record. As a kid, it seemed to take forever! There were all these questions about salt, consistency, sugar, etc. Saying “horrible” or “wonderful” were not allowed. I personally don’t remember when it ended, nor do I recall missing those trials.
I hadn’t thought about taste-testing Campbell’s Soup until recently. A friend was asking me how my parents handled the economy during the surge of inflation that occurred after World War II. I mentioned that I didn’t know; they never spoke about it. But I do remember how my parents struggled to start their purebred dairy farm herd, struggling not only for its survival but to make it prosperous. Being one of the oldest of ten siblings, I saw firsthand the day a foreigner came to purchase one of my father’s prized Holsteins. Eventually a new house to replace the former uninsulated old farm home occurred. I cannot recall any big celebrations but there was more ice cream in the freezer, more Sears and Roebuck orders (dating myself) and eventually a new auto that actually had a heater that worked.
Here at White Raven Financial2, we haven’t done anything new or out-of-the ordinary due to the current state of inflation. But we would like to learn if inflation is affecting you and whether you have some suggestions for others on how you are handling the price adjustments.
Two signs of an overheated economy, per Investopedia3, are rising rates of inflation and an unemployment rate that is below normal. Currently, unemployment rates continue to be at record lows4 which is a bonus for those employees who are receiving raises to stay with a company. As the Federal Reserve continues to fight inflation, we find our economy supporting a stronger U.S. dollar5 than it has been in many years. While this may be good news for U.S. international travelers, it does present problems6 for many U.S. Companies that export. Taylor Tepper, Forbes Advisor attributes some of the strength of the dollar7 from interest rates brought about by a hawkish Federal monetary policy and the current state of the U.S. economy. In his blog, Tepper also noted how this same strong U.S. dollar has impacted investors and the market.
Overseas, we learned that inflation was over 10% in several countries8 and that Britain’s current economic plan appeared to have the ability to rock the markets9. The backdrop in Europe is difficult9 with the war in Ukraine being over six months old causing global economy headwinds. Abrdn, in their 4th quarter news letter10, noted that even though there is some uncertainty, they see some respite from the earlier weaknesses due to the corporate sector continuing to produce earnings and cashflows that are ahead of expectations.
Staying in the market for the long run, when it’s testing the patience of even the most stalwart, is difficult when the pendulum swings to lower lows. Saying “you are not alone” does not seem to help because it does feel as if you are alone. Historically, the market eventually does roar back11. “But life is long. And it is the long run that balances the short flare of interest and passion.” – Sylvia Plath
The Feds care continuing to work to fight the rising inflation. And the September indices showed their ire throughout the month. Of the three major indices, the blue-chip barometer (the DOW)* posted the least loss at -8.77% for the month. The S&P 500 (SPY)* followed suit hitting the middle at a -9.24% loss. The tech-rich Nasdaq Composite (COMPTR)* came in with a -10.5% loss. (*After linking, click on Quarterly & Monthly Total Returns, “Monthly” tab). On Tuesday, September 27th, the Dow Jones Indices released the latest S&P CoreLogic Case-Shiller13 report. The report showed that for the reporting month home prices across the U.S. continued their deceleration. The July 20-city composite Home Price Index13 reported a 16.6% year-over-year gain; down 2.6% from the previous month year-over-year posting. Before seasonal adjustments, month-over-month data had the month of July showing a -0.8% decrease over the prior month of June for the 20-city composite index.
Regards and thank you (as always) for reading,
The Team at White Raven Financial
Advisory services offered through White Raven Financial Services, Inc. a Registered Investment Advisor in the State of Washington.
*Indexes are unmanaged and do not reflect service fees, commissions, or taxes. You cannot invest directly in an index. Past performance is not necessarily indicative of future results. Returns for the DOW, S&P 500 and the NASDAQ are the total return (price only) provided by Morningstar as September 30, 2022. Diversification and asset allocation do not assure or guarantee better performance and cannot eliminate the risk of investment loss.
*The Standard and Poor’s 500 is an unmanaged, capitalization weighted benchmark that tracks broad-based changes in the U.S. stock market. This index of 500 common stocks is comprised of 400 industrial, 20 transportation, 40 utility, and 40 financial companies representing major U.S. industry sectors. The index is calculated on a total return basis with dividends reinvested and is not available for direct investment.
*The Dow Jones Industrial Average covers 30 blue chip U.S. companies selected by the editors of the Wall Street Journal. The Dow represents about 25% of the NYSE market capitalization and less than 2% of NYSE issues.
*The NASDAQ is a market-value weighted index that measures all NASDAQ domestic and foreign common stocks.
Sources:
- https://www.whiteravenfinancial.com
- https://www.investopedia.com/terms/o/overheated_economy.asp#:~:text=An%20overheating%20economy%20is%20an%20economy%20that%20is,range%20from%20external%20economic%20shocks%20to%20asset%20bubbles.
- https://abcnews.go.com/US/wireStory/fewer-people-seek-us-unemployment-aid-amid-solid-90690648
- https://finance.yahoo.com/news/why-the-strong-us-dollar-so-strong-134038886.html
- https://www.marketplace.org/2022/09/28/strong-u-s-dollar-presents-problems-for-much-of-the-world/
- https://www.msn.com/en-us/money/markets/why-is-the-us-dollar-so-strong-right-now/ar-AA12tF3C
- https://www.sfgate.com/news/article/Inflation-hits-record-10-in-19-EU-countries-17477401.php
- https://www.msn.com/en-us/money/markets/britains-market-rocking-tax-cuts-have-been-compared-to-reaganomics-but-there-are-differences/ar-AA12yY0d
- https://www.abrdn.com/en-us/investor/insights-thinking-aloud/article-page/global-outlook-q4-2022?opendocument&utm_campaign=AMER_Our%20Thinking%20Newsletter_092722&utm_medium=email&utm_source=Eloqua&utm_content=CAAML000001734000&utm_company=White%20Raven%20Financial&cn=Newsletters
- https://finance.yahoo.com/news/stock-market-eventually-roaring-back-history-shows-180334088.html
- * https://Morningstar.com (index)
- https://www.prnewswire.com/news-releases/sp-corelogic-case-shiller-index-decelerated-in-june-301614774.html
