Blog
The Markets
The rate cut stars are aligning.
For the last year, borrowing costs in the United States have remained relatively high as the U.S. Federal Reserve (Fed) waited for economic data to show that inflation was on track to reach the Fed’s two percent target. Now, we may finally be on the cusp of lower rates.
“The Fed’s preferred inflation gauge has eased to 2.6 [percent], not far off its 2 [percent] target, and the once overheated labor market has cooled to pre-pandemic levels. The rebalancing has been accompanied by moderation in consumer spending, as high prices and borrowing costs damp demand and thus price pressures,” reported Victoria Cavaliere of Bloomberg.1
Last week, Fed Chair Jerome Powell told the Economic Club of Washington D.C., “…if you wait until inflation gets all the way down to 2 [percent], you probably waited too long…Our test has been that we wanted to have greater confidence that inflation was moving sustainably down toward our 2 percent target. What increases that confidence is more good inflation data and, lately here, we have been getting some of that.”2
Few anticipate the Fed will lower the federal funds rate at its July meeting, but the outlook for September is good. The probability of a September rate cut was above 90 percent last week, according to the CME FedWatch.3
Changing rate expectations disrupted stock markets, last week. Investors moved from big technology firms into smaller companies that tend to perform better when rates are lower. Rita Nazareth of Bloomberg explained that the market experienced, “a ‘rotation’ that saw investors trimming positions on this year’s winners in favor of laggards. Underpinning that trade were bets the 2024 rally would broaden out of megacaps as the Federal Reserve cuts rates.”4
By the end of the week, the Standard & Poor’s 500 Index was down about 2.0 percent and the Nasdaq Composite had fallen about 3.7 percent. The Dow Jones Industrial Average fared better, finishing the week in positive territory, reported Alex Harring and Jesse Pound of CNBC.5 Yields on U.S. Treasuries were mixed over the week.6
Data as of 7/19/24 | 1-Week | YTD | 1-Year | 3-Year | 5-Year | 10-Year |
| Standard & Poor’s 500 Index | -2.0% | 15.4% | 20.6% | 8.9% | 13.1% | 10.8% |
| Dow Jones Global ex-U.S. Index | -2.3 | 5.6 | 7.6 | -1.0 | 3.4 | 1.7 |
| 10-year Treasury Note (yield only) | 4.2 | N/A | 3.7 | 1.2 | 2.1 | 2.5 |
| Gold (per ounce) | -0.1 | 15.6 | 21.7 | 9.8 | 10.8 | 6.2 |
| Bloomberg Commodity Index | -3.2 | -1.2 | -7.6 | 1.9 | 4.2 | -2.8 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
MICROCHIP COMPANIES STUMBLED OVER GOVERNMENT POLICY. In general, one aim of governments in democratic countries is to implement policies that promote solid and sustainable economic growth.7 Sometimes, a policy change—or the possibility of one—will ripple through financial markets. Last week, we saw two examples of this as companies that have benefited from enthusiasm around artificial intelligence saw their share prices drop sharply when it appeared that U.S. government policy might change.
- Stricter limits could be imposed on some exports to China. In one case, a potential change in government policy caused the share price of a Dutch company to drop, reported Adam Clark of Barron’s. The company produces lithography machines that are necessary for semiconductor manufacturing. The company’s solid second quarter earnings report was overshadowed by news that President Biden may impose new restrictions on exports to China.8 Clark reported that the administration:
“…is considering more severe trade restrictions on exports to China if companies…continue selling chip-making machinery to the country. While the [lithography machinery] company is already restricted from selling its most advanced machines to Chinese customers, [the company] still generated 49% of its revenue from China in the second quarter, as buyers looked to stock up on older machinery.”8
- The United States’ relationship with Taiwan may change. In an interview with Bloomberg Businessweek, presidential candidate Donald Trump was asked about the United States’ relationship with Taiwan. He answered, “They did take about 100 [percent] of our chip business. I think, Taiwan should pay us for defense.”9
After the remarks became public, the share price of Taiwan’s largest company—the world’s largest maker of advanced chips—tumbled, reported George Glover of Barron’s.10 The share price fell even though the company had beaten quarterly estimates and lifted 2024 revenue projections, reported Jane Lanhee Lee of Bloomberg.11
Other chip companies’ stocks moved lower, too, on concerns that a change in U.S. policy could result in new supply chain disruptions. “China’s ruling Communist Party has vowed to ‘reunify’ with Taiwan and has refused to rule out using military force to take back control of the country,” reported Glover.10
It can be dismaying when the value of a stock or stock market index moves lower. However, falling share prices sometimes have silver linings. They sometimes create opportunities to invest in companies with solid fundamentals at attractive prices.
Weekly Focus – Think About It
“It’s not what you look at that matters, it’s what you see.”12―Henry David Thoreau, author
* These views are those of Carson Coaching, not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the 3:00 p.m. (London time) gold price as reported by the London Bullion Market Association and is expressed in U.S. Dollars per fine troy ounce. The source for gold data is Federal Reserve Bank of St. Louis (FRED), https://fred.stlouisfed.org/series/GOLDPMGBD228NLBM.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
Sources:
[1] https://www.cnbc.com/2024/07/15/powell-indicates-fed-wont-wait-until-inflation-is-down-to-2percent-before-cutting-rates.html (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/07-22-24_Bloomberg_Economists%20Warn%20Trump%20Policies%20Would%20Stoke%20Inflation_1.pdf)
3 https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/07-22-24_CME%20Group_FedWatch_FOMC%20Rate%20Moves_3.pdf)
4 https://www.bloomberg.com/news/articles/2024-07-18/stock-market-today-dow-s-p-live-updates?srnd=phx-markets (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/07-22-24_Bloomberg_Stocks%20Slide%20Before%20High-Stakes%20Megacap%20Earnings_4.pdf)
5 https://www.cnbc.com/2024/07/18/stock-market-today-live-updates.html
7 https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/Fiscal-Policy
8 https://www.barrons.com/articles/asml-stock-drop-price-buy-sell-79d71cc3?mod=hp_LEAD_1_B_3 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/07-22-24_Barrons_ASML%20Stock%20is%20a%20Buying%20Opportunity%20After%20Tumble_8.pdf)
9 https://www.bloomberg.com/features/2024-trump-interview-transcript/ (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/07-22-24_Bloomberg_The%20Donald%20Trump%20Interview%20Transcript_9.pdf)
10 https://www.barrons.com/articles/tsmc-stock-price-taiwan-semi-e70d6c61?mod=article_inline (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/07-22-24_Barrons_TSMC%20Stock%20Falls_10.pdf)
[1]1 https://www.bloomberg.com/news/articles/2024-07-18/tsmc-s-profit-surpasses-estimates-after-ai-investment-surges (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/07-22-24_Bloomberg_TSMC%20Hikes%20Revenue%20Outlook%20to%20Reflect%20Heated%20AI%20Demand_11.pdf)
12 https://www.brainyquote.com/quotes/henry_david_thoreau_106041
The Markets
Will deflation continue?
In May, Pew Research asked Americans about the biggest problems facing our nation. The top three answers were:1
- Inflation;
- The ability of Democrats and Republicans to work together; and
- The affordability of health care.
Last week, there was some good news about the first issue. Inflation became deflation as the Consumer Price Index (CPI) fell in June after remaining unchanged in May. Headline inflation was ‑0.1 percent month over month.2
Megan Leonhardt of Barron’s reported on the CPI’s findings: “The details under the hood, so to speak, also largely provided good news for consumers and Fed officials. Goods deflation continued — driven by falling new and used vehicle prices—while services costs also trended down. And housing costs, a persistently stubborn sector when it comes to progress in taming inflation, increased just 0.2% on the month — a slowdown from the consistent monthly readings of 0.4%.”3
Cooling inflation may lead the Federal Reserve (Fed) to begin lowering the federal funds rate – and that would make borrowing less expensive.3 Optimism about lower rates led to a bond market rally, and a realignment in the stock market. Rita Nazareth of Bloomberg explained:
“Wall Street traders betting the Federal Reserve will be able to cut rates soon sent bond yields tumbling — while driving a big rotation out of the tech megacaps that have powered the bull market in stocks. Further signs that inflation is slowing down fueled speculation the Fed will be able to move as early as September. Optimism over lower rates sparked a shift into riskier corners of the market — as money exited the long-favored safety trade of big tech.”4
Last week, major U.S. stock market indices moved higher with the Dow Jones Industrial Average hitting its first record high for 2024, reported Jacob Sonenshine.5 The yield on the benchmark 10-year U.S. Treasury note moved lower last week.6
Over the weekend, after this commentary was written, there was an attempt to assassinate former President Donald Trump. We condemn this senseless act. We will stay alert to how this affects financial markets.
Data as of 7/12/24 | 1-Week | YTD | 1-Year | 3-Year | 5-Year | 10-Year |
| Standard & Poor’s 500 Index | 0.9% | 17.7% | 25.6% | 8.6% | 13.3% | 11.0% |
| Dow Jones Global ex-U.S. Index | 2.1 | 8.0 | 11.8 | -1.1 | 3.9 | 1.9 |
| 10-year Treasury Note (yield only) | 4.2 | N/A | 3.9 | 1.4 | 2.1 | 2.6 |
| Gold (per ounce) | 1.2 | 15.8 | 23.2 | 10.3 | 11.3 | 6.3 |
| Bloomberg Commodity Index | -1.7 | 2.1 | -2.6 | 2.4 | 4.5 | -2.5 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
A QUIZ FOR SOCCER FANS. Over the last couple of weeks, fans of the world’s most popular sport were riveted as the men’s championships played out in Europe and the United States. Last weekend, Spain took on England at the UEFA EURO 2024 championship in Berlin, Germany, while Argentina and Colombia duked it out for the CONMEBOL Copa AméricaTM title in Miami, Florida. Fans of the beautiful game (soccer) can test their knowledge of the tournaments by taking this brief quiz.
- In the history of European Championship matches, 30 own goals have been scored. (An own goal is when a team scores on itself.) How many own goals were tallied in the 2024 tournament prior to last weekend?
- Two
- Four
- Seven
- Ten
- Colombia beat Uruguay in the Copa América semifinal. For some of that match, Colombia had 10 players on the field after losing a player to a red card. How long did the team compete with only 10 players?
- 15 minutes
- 45 minutes
- 60 minutes
- During injury time (aka stoppage time)
- Spain’s Lamine Yamal was the youngest player to start in the Champions league and the youngest to score at the European Championship. How old was he when he scored?
- 15
- 16
- 17
- 18
- Who holds the record for the most assists – passes that lead directly to goals – in the Copa América tournament?
- Luis Suarez
- Lionel Messi
- Luis Figo
- James Rodriguez
- Bonus question: Which women’s team won the 2024 CONCACAF W Gold Cup?
- Mexico
- United States
- Canada
- Brazil
What’s your favorite bit of soccer trivia?
Weekly Focus – Think About It
“The thing about football – the important thing about football – is that it is not just about football.”7
―Terry Pratchett, author
Answers: 1) d8; 2) b9; 3) b10; 4) d11; 5) b12
* These views are those of Carson Coaching, not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the 3:00 p.m. (London time) gold price as reported by the London Bullion Market Association and is expressed in U.S. Dollars per fine troy ounce. The source for gold data is Federal Reserve Bank of St. Louis (FRED), https://fred.stlouisfed.org/series/GOLDPMGBD228NLBM.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
Sources:
2 https://www.bls.gov/news.release/pdf/cpi.pdf
3 https://www.barrons.com/livecoverage/cpi-inflation-june-report-data-today?mod=article_inline (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/07-15-24_Barrons_Pivotal%20Inflation%20Data%20Fuel%20Optimism%20for%20Sept%20Rate%20Cut_3.pdf)
4 https://www.bloomberg.com/news/articles/2024-07-10/stock-market-today-dow-s-p-live-updates (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/07-15-24_Bloomberg_Stock%20Rotation%20Hits%20Megacaps%20on%20Bets%20Fed%20Will%20Cut_4.pdf)
5 https://www.barrons.com/articles/tech-stocks-small-caps-1817f4f9?refsec=the-trader&mod=topics_the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/07-15-24_Barrons_Tech%20Stocks%20Have%20Fallen%20Out%20of%20Favor_5.pdf)
6 https://www.barrons.com/market-data/bonds?mod=md_subnav (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/07-15-24_Barrons_Data_6.pdf)
7 https://www.goodreads.com/quotes/tag/soccer
8 https://en.wikipedia.org/wiki/List_of_UEFA_European_Championship_own_goals
9 https://sports.yahoo.com/rash-red-card-curbs-colombias-005800066.html
[1]0 https://apnews.com/article/yamal-spain-euro-2024-youngest-scorer-5f30ffdc3dbf58087a353b6ef2584a69
[1]1 https://copaamerica.com/en/news/james-record-assists-copa-america-colombia-uruguay [1]2https://en.wikipedia.org/wiki/CONCACAF_W_Gold_Cup
Are we at an inflection point?
The transition to renewable energy has been moving forward and may be reaching an inflection point. In 2023, global renewable energy capacity increased by almost 50 percent, reported the International Energy Agency (IEA). Renewable capacity reached all-time highs in the United States, Europe and Brazil. However, the leader in new capacity is China. In 2023, the country “commissioned as much solar PV [photovoltaic] as the entire world did in 2022,” stated the IEA’s Renewables 2023 report.1
In the United States, solar power is responsible for a relatively small amount (3.9 percent in 2023) of all electricity generated; however, solar is growing faster than any other source of electricity. One reason for the growth is Big Tech companies’ commitment to clean energy. Four of the “Magnificent Seven” were responsible for “40% of the demand for large, utility-scale solar projects in the U.S. over the past five years,” reported Spencer Kimball and Gabriel Cortés of CNBC. 2
“To call solar power’s rise exponential is not hyperbole, but a statement of fact. Installed solar capacity doubles roughly every three years, and so grows ten-fold each decade. Such sustained growth is seldom seen in anything that matters. That makes it hard for people to get their heads round what is going on. When it was a tenth of its current size ten years ago, solar power was still seen as marginal even by experts who knew how fast it had grown. The next ten-fold increase will be equivalent to multiplying the world’s entire fleet of nuclear reactors by eight in less than the time it typically takes to build just a single one of them,” reported The Economist.3
The IEA forecasted that by 2028 renewable energy sources will generate more than 42 percent of the world’s electricity. Wind and solar PV energy sources are expected to deliver about 25 percent of global electricity.1
There are some obstacles to renewable energy growth, though. Current constraints include siting, permitting and grids, reported BloombergNEF.4 From 2000 to 2018, just 20 percent of U.S. renewable energy projects that sought to be connected to the power grid were actually connected.2
“Grids were not originally set up for such a fast-paced energy system; their tools and processes were developed in a slower, less volatile world…[Renewable energy source] infrastructures are already available and rapidly increasing. However, taking advantage of renewables requires a power grid that can accommodate these intermittent energy sources,” reported McKinsey & Company’s Adam Barth and colleagues.5
Last week, major stock market indices finished higher with the Standard & Poor’s 500 Index chalking up its 31st record high for 2024 during the week, reported Jacob Sonenshine of Barron’s.6 Many maturities of U.S. Treasury bonds finished this week slightly higher than they ended last week.7
Data as of 6/21/24 | 1-Week | YTD | 1-Year | 3-Year | 5-Year | 10-Year |
| Standard & Poor’s 500 Index | 0.6% | 14.6% | 25.2% | 9.0% | 13.1% | 10.8% |
| Dow Jones Global ex-U.S. Index | 0.2 | 3.6 | 8.0 | -2.3 | 3.1 | 1.5 |
| 10-year Treasury Note (yield only) | 4.3 | N/A | 3.7 | 1.5 | 2.1 | 2.6 |
| Gold (per ounce) | 0.2 | 12.4 | 21.6 | 9.6 | 10.8 | 5.9 |
| Bloomberg Commodity Index | -0.7 | 3.1 | -2.9 | 3.6 | 5.2 | -2.9 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
COIN CONUNDRUM. What do you do with loose change? Many people have informal collecting stations: a money jar in the kitchen, a slide of coins on the dryer, or a jangle of change in a backpack. Oyin Adedoyin of The Wall Street Journal reported via MSN:
“Coins are as good as junk for many Americans. Buses, laundromats, toll booths, and parking meters now take credit and debit cards and mobile payments. Using any form of physical currency has become more of an annoyance, but change is often more trouble than it is worth to carry around. The U.S. quarter had roughly the buying power in 1980 that a dollar has today.” 8
Sometimes, coins are exchanged for dollars at the bank, but a lot of change ends up in the trash. A waste management company in Pennsylvania recovers $500,000 to a million dollars in coins each year as it sorts metal from other waste.8
And that’s just the face value of the coins.
U.S. coins often cost more to make than they are worth. The biennial report from the United States Mint showed that, in 2022, the United States spent:9
- 2.7 cents to make a penny,
- 10.4 cents to make a nickel,
- 5 cents to make a dime, and
- 11 cents to make a quarter.
“Currently, Congress must pass a law to either specifically make changes to statutory coin composition or provide authority for the Mint to change to an alternative metal under certain conditions,” stated the report. Depending on the solution, a change could save the government $12 to $24 million.9
The Mint recommended that Congress take steps to remedy the issue. Legislation was introduced to the 116th Congress, which governed from 2019-2021 (the Coin Metal Modification Authorization), and the 117th Congress, which governed from 2021-2023 (Cost Savings Act). So far, it has not been passed.9
Weekly Focus – Think About It
“Don’t tell me where your priorities are. Show me where you spend your money, and I’ll tell you what they are.”10 ―James W. Frick, former development officer, University of Notre Dame
* These views are those of Carson Coaching, not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the 3:00 p.m. (London time) gold price as reported by the London Bullion Market Association and is expressed in U.S. Dollars per fine troy ounce. The source for gold data is Federal Reserve Bank of St. Louis (FRED), https://fred.stlouisfed.org/series/GOLDPMGBD228NLBM.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
Sources:
[1] https://www.iea.org/reports/renewables-2023/executive-summary
2 https://www.economist.com/leaders/2024/06/20/the-exponential-growth-of-solar-power-will-change-the-world (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/06-24-24_Economist_The%20Exponential%20Growth%20of%20Solar%20Power%20Will%20Change%20the%20World_2.pdf)
4 https://about.bnef.com/blog/us-clean-power-at-inflection-point-bnef-summit-new-york/ (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/06-24-24_BloombergNEF_US%20Clean%20Power%20at%20Inflection%20Point_4.pdf)
6 https://www.barrons.com/articles/stock-market-rally-ending-5ed9e442?refsec=the-trader&mod=topics_the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/06-24-24_Barrons_Its%20Been%20a%20Good%20Bull%20Run%20for%20Stocks_6.pdf)
9 https://www.usmint.gov/wordpress/wp-content/uploads/2023/04/2022-USM-Biennial-Report_P5_FINAL.pdf [Pages 4, 6, 8-9] 10 https://www.goodreads.com/author/quotes/21470345.James_W_Frick
The Markets
Overall, May was a good month for investors.
The adage, “Sell in May and go away,” would have been poor advice last month. Major stock indices in the United States finished the month higher. Connor Smith of Barron’s reported:1
- The Nasdaq Composite was up 6.9 percent for May,
- The Standard & Poor’s 500 Index gained 4.8 percent, and
- The Dow Jones Industrial Average finished 2.3 percent higher.
Despite the positive returns, May was also a volatile month for stocks as investors worried about inflation and whether the Federal Reserve will begin to lower rates in 2024, reported Paul La Monica of Barron’s.2
For much of last week, stocks trended lower.3 The Conference Board’s Consumer Confidence Index surprised by exceeding economists’ expectations for May, but it had little effect on investors as the report wasn’t rosy.4
Confidence improved “…amid optimism about the labor market, but worries about inflation persisted and many households expected higher interest rates over the next year…The mixed survey…also showed more consumers believed that the economy could slip into recession in the next 12 months,” reported Lucia Mutikani of Reuters.5
Late in the week, markets regained lost ground after the Personal Consumption Expenditures Price Index (one of the Federal Reserve’s preferred inflation gauges) data arrived. The Index showed that core inflation, which excludes volatile food and energy prices, ticked lower from March to April. Headline inflation remained steady month to month.6
Year to year, headline inflation was 2.7 percent in April and core inflation was 2.8 percent.6
Major U.S. stock indices finished the week lower.7 The yield on the benchmark 10-year U.S. Treasury finished the week close to where it started the week.8
Data as of 5/31/24 | 1-Week | YTD | 1-Year | 3-Year | 5-Year | 10-Year |
| Standard & Poor’s 500 Index | -0.5% | 10.6% | 26.3% | 7.9% | 13.9% | 10.6% |
| Dow Jones Global ex-U.S. Index | -0.8 | 4.3 | 13.9 | -2.5 | 4.3 | 1.7 |
| 10-year Treasury Note (yield only) | 4.5 | N/A | 3.6 | 1.6 | 2.1 | 2.5 |
| Gold (per ounce) | 0.2 | 13.0 | 19.5 | 7.3 | 12.6 | 6.5 |
| Bloomberg Commodity Index | -1.9 | 4.4 | 5.1 | 3.0 | 5.8 | -2.6 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
YOUNGER GENERATIONS ARE FRUSTRATED WITH BABY BOOMERS. The saving and spending habits of baby boomers, born between 1946 and 1964, have been discussed in the news and on social media lately. Much of the discussion has focused on the wealth accumulated by the world’s baby boom generation. Boomers have, broadly speaking, acquired significant wealth over their lifetimes. The Economist reported that baby boomers in the United States comprise “20% of the country’s population, own 52% of its net wealth, worth $76 [trillion].”9
Instead of congratulating a group that is likely to live longer in retirement than previous generations have, some conversations accuse boomers of hoarding wealth,9 while others suggest that policy mistakes by leaders in the cohort have held back younger generations economically.10
Whether these discussions reflect the beliefs of younger generations is unclear. Regardless, boomers have solid reasons for spending slowly. These include:
Leaving an inheritance for younger generations. “Many boomers recognize how lucky they are to have accumulated such enormous wealth. They want to pass it on to their children, many of whom are struggling to buy a house or pay school fees… The flow of bequests from the dead to the living, as a share of GDP, is rising fast across the rich world. Americans inherit about 50% more each year than they did each year in the 1980s and 1990s, for instance.”9
Living longer in retirement. Longevity risk is a significant concern for baby boomers, many of whom may spend 30 years or more in retirement. According to the Employee Benefits Research Institute’s Retirement Confidence survey, 32 percent of workers and 26 percent of retirees are not confident they will have enough money to live comfortably through retirement.11
Keeping a reserve – just in case. British research found that older people who do not believe they will need long-term care are likely to spend their savings more quickly, while those who believe there is a possibility of becoming less mobile or developing dementia are likely to spend more slowly.9
Planning for retirement is not a simple task, especially with the possibility of reduced Social Security benefits ahead.12 A new report from Goldman Sachs found that a majority of millennials and Gen Z are ahead on planning and saving for retirement, while almost half of the Gen X and baby boomer generations are behind.13
If you have any questions about retirement or estate planning, please get in touch.
Weekly Focus – Think About It
“Wealth consists not in having great possessions, but in having few wants.”14
―Epictetus, philosopher
* These views are those of Carson Coaching, not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the 3:00 p.m. (London time) gold price as reported by the London Bullion Market Association and is expressed in U.S. Dollars per fine troy ounce. The source for gold data is Federal Reserve Bank of St. Louis (FRED), https://fred.stlouisfed.org/series/GOLDPMGBD228NLBM.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
Sources:
[1] https://www.barrons.com/livecoverage/stock-market-today-053124/card/nasdaq-roars-in-late-trading-as-stocks-finish-strong-month-MvOOyCtoznraH3ttkx5m (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/06-03-24_Barrons_Nasdaq%20Rallies%20as%20Stocks%20Finish%20Strong%20Month_1.pdf)
2 https://www.barrons.com/articles/inflation-pce-fed-stocks-55fa0173?refsec=markets&mod=topics_markets (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/06-03-24_Barrons_Inflation%20Data%20Offer%20Good%20News%20for%20Stocks_2.pdf)
3 https://finance.yahoo.com/quote/%5EGSPC/
4 https://www.conference-board.org/topics/consumer-confidence
5 https://www.reuters.com/markets/us/us-consumer-confidence-unexpectedly-improves-may-2024-05-28/
6 https://www.bea.gov/sites/default/files/2024-05/pi0424.pdf
7 https://www.barrons.com/market-data?mod=BOL_TOPNAV (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/06-03-24_Barrons_Data_7.pdf)
9 https://www.economist.com/finance-and-economics/2024/05/26/baby-boomers-are-loaded-why-are-they-so-stingy (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/06-03-24_The%20Economist_Baby%20Boomers%20are%20Loaded_9.pdf)
11 https://www.ebri.org/docs/default-source/rcs/2024-rcs/2024-rcs-release-report.pdf?sfvrsn=2447072f_1 [page 5]
12 https://finance.yahoo.com/news/20-cuts-social-security-may-123017196.html