The text received on the 20th of March said, “Lit the match first day of cooking”. In short code, one of my northern Wisconsin brothers is notifying us (his siblings), that his annual hobby1 of making syrup has started for another year. It is not an easy pastime to gather sap as the season is short, the workdays are long, and the weather is fickle. On the other hand, hired help is free – aka – my sister-in-law. He calls the money he makes his “funny money”. This money is always ear marked for an expense that he would never consider purchasing if no extra income was garnered from the syrup business. Last year the “funny money” paid for a trip to visit us2 and the Grand Canyon. Another year it paid for an array of solar panels on their acreage. If he had to pay himself and his crew for labor, I have a strong feeling, though not positive, that the profit would be in the lower percentages.
Due to compliance regulations, writing about the comments we receive about our financial planning advice is frowned upon. Although I don’t think a financial firm has ever been called “sweet” or “sugary”. But, like the story above, here at White Raven Financial3 we advise our clients to save for goals, uncommon expenses, and have an emergency fund. Sometimes we ask them to make a list and prioritize their needs and desires4. It is not unusual for us (as financial planners) to ask them to earmark some investments (or bucket of funds); setting a timeline for when they are needed within their risk tolerance; and the probability of possible market volatility. The key takeaway is to not only focus on the big picture but also the tasks that make up the total picture.
The business of oil appeared throughout our domestic economic readings alongside the continued ‘sticky’ inflation concerns. Our budgets, and time at the gas station, gave us fore-warning but official notice came on March the 10th when the Consumer Price Index showed its highest inflation level in 40 years5 with a 7.9% year-over-year reading. The Federal Reserve has a strategy for fighting inflation by hiking interest rates. The potential impact of the interest rate hikes on our economy was highlighted in a blog by James McCann and Luke Bartholomew economists at abrdn plc6. They felt that the Federal Open Market Committee would continue with its commitment of additional 0.25% rate hikes throughout this year – but this adjustment (needed to help cool inflation) will probably weigh on growth. Another big news item in March was the inversion of the yield spread7 (this occurs when shorter-dated yields i.e. two-year-treasury at 2.44% are higher than longer-dated yields i.e. ten-year-treasury at 2.41%). Taylor Tepper and Benjamin Curry, in a Forbes blog, noted a concern that we have seen voiced by others: The concern is the challenge for the Fed to raise interest rates enough to quell inflation but not too high to potentially cause a recession.
Overseas we have the continued Russia-Ukraine situation that doesn’t seem to be getting any better. Andrew Pease, Global Head of Investment Strategy for Russell Investments, in their Q2 2022 – Global Market Outlook9 noted that the main economic cycle risks, due to the Russia/Ukraine conflict are: 1) The impact on global growth and inflation due to energy prices 2) Percentage of global wheat and corn exported and the impact to food prices 3) Supply chain disruption. Jeffrey Kleintop, Chief Global Investment Strategist for Charles Schwab, in his March 28th commentary10 noted that the purchasing price index (PMI) readings for the major countries were resilient despite the war. He further noted that if the trend for the PMI continued, the outlooks for earnings growth would also likely continue.
The market has been volatile lately. The prior ups and, lately, the pullbacks, are a normal part of investing similar to the ebbs and flows of sap gathering. For those in for the long term; we believe staying in the game is important!
The major market indices appeared with a ‘Spring Forward’ in March along with the beginning of the annual syrup season. Of the three major indices, the blue-chip barometer (the Dow)* had green shoots sprouting and posted a 2.32% gain. The S&P 500 (SPY)* had nature showing its colors and emerged with a 3.58%. The tech-rich Nasdaq Composite (COMPTR)* did similar to its brethren and posted 3.41% growth. (*After linking, click on Quarterly & Monthly Total Returns, “Monthly” tab). On Tuesday, March 29th, the Dow Jones Indices released the latest S&P CoreLogic Case-Shiller12 report. The report showed that for the reporting month home prices continued to increase. The January 20-city composite Home Price Index12 reported a 19.1% year-over-year gain; up 0.5% from the previous month year-over-year posting. Before seasonal adjustments, month-over-month data had the month of January showing a 1.4% increase over the prior month of December 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 March 31, 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://business.facebook.com/jochimsensmaplesyrup/?__xts__[0]=68..
- https://www.whiteravenfinancial.com/
- https://www.whiteravenfinancial.com/about/
- https://www.whiteravenfinancial.com/the-list-of-ten/
- https://www.wcpo.com/news/local-news/shoppers-prepare-to-recalculate-budgets-as-inflation-hits-40-year-high
- https://www.abrdn.com/en-us/us/investor/insights-thinking-aloud/article-page/inflation-interest-rates-and-the-risk-of-recession?opendocument&utm_campaign=AMER_Our%20Thinking%20Newsletter_033022&utm_medium=email&utm_source=Eloqua&utm_content=CAAML000001734000&utm_company=White%20Raven%20Financial&cn=Newsletters&elqcst=272&elqcsid=19182
- https://www.ocregister.com/2022/03/29/u-s-two-and-10-year-yields-invert-flashing-recession-signal/
- https://www.forbes.com/advisor/investing/fomc-meeting-federal-reserve/
- https://russellinvestments.com/us/global-market-outlook?utm_campaign=NA-AIS_22_03_GMO2022_Q2_E&utm_medium=email&utm_source=Eloqua&EloquaContactID=92550
- https://www.schwab.com/resource-center/insights/content/war-impact-on-earnings
- * https://Morningstar.com (index)
- https://www.prnewswire.com/news-releases/sp-corelogic-case-shiller-index-reports-19-2-annual-home-price-gain-to-start-2022–301512823.html
