It’s been a tough morning. Or rather, it’s been tough mourning. For this admittedly sensitive, Christian husband and father of two boys, the last couple of weeks of news has really been hard to process, even when I don’t personally know any of the parties involved, and I just feel raw. The heartless attack on the schoolchildren inside the Church of the Annunciation in Minneapolis was just two weeks and a day ago. Two children perished and 21 other people were injured. Flash forward to the mindless murder on the Charlotte Lynx Blue Line of Iryna Zarustka, an innocent woman just going about her daily life before she’s shockingly stabbed in the neck by someone she doesn’t know. If you saw the picture taken of her where she looks up and back in horror at her assailant, you’ll never be the same. Barely noticed yesterday was another school shooting, this one at Evergreen High School in Colorado1. At the time of the writing of this, nobody but the shooter died, though one person had critical injuries and another had non-life-threatening injuries. That was just hours before an unknown sniper on the roof of a Utah Vally State building took the life of faithful political activist Charlie Kirk, who leaves behind a devastated family. That video, of his little daughter rushing up to hug him on the news set a week ago … There are no words2. All of this, too, culminates on the anniversary of a day we’ll never forget 24 years ago, when we all watched in stunned disbelief as terrorists ended the lives of 2,977 people as the Twin Towers crumbled to the ground. I don’t know how many loops of that video I saw but the videos of people asking desperately for help finding their loved ones in the aftermath of that attack brought me to tears that day.
It’s all been too much lately. Nothing feels safe. We’re all going to be on high alert if our husbands and wives go climbing aboard public transit. We’re going to be nervous just sending our kids to school. Some of us may even be scanning rooftops at big events …
We could not put out our Market Mindset without acknowledging and paying our respects to the victims and their families. We grieve with those they leave behind even as we realize that most of us can’t begin to fathom the depths of their losses. We offer this reminder to the broken families, to those of the Faith who are all affected by the senseless tragedies, as well as our clients and friends who have recently lost dear loved ones: “The LORD is close to the brokenhearted and saves those who are crushed in spirit.” (Psalms 34:18 NIV)3
We’ll leave the political analysis of the horrific events to others. It’s all too easy to engage in political debate when that’s not our goal. Every conversation seems to turn political these days. Whether in our economic analysis, we’re talking about large payroll revisions (that you should all be aware goes back a long time), what the role of the Fed is or because you’re talking about this or that economic data point you must be affiliated with the ___________ Party. That’s not what we’re about. Our task is to take the assets you’ve entrusted to us and turn it into tax-efficient income that will last as long as possible and create a financial shield for you and your family through Taxes, Investments, Insurance and Estate Planning. Politics does not and should not enter the equation, even though every economic topic seems tinged with political fervor thanks to media on both sides hell-bent on the highest ratings possible. Numbers are numbers (even ones we believe to be contrived – which has been the case for both political parties when in power), and that’s what we’re sticking to with our analysis.
So, on that note, let’s all take a deep breath together … and look at the data before us this week. What’s it saying to us?
Frankly it’s just getting weird. Inflation data came out this morning and the CPI reading showed an increase of 0.4% for the month, according to the Bureau of Labor Statistics, higher than the 0.3% that economists polled by Dow Jones were expecting. Simultaneously, at the CME Fed Watch Tool, that we follow, expectations of a half-point cut actually increased. At first glance it would appear that perhaps traders are in denial because they’ve so bought into a narrative that the large revisions in payroll data indicating that a million jobs fewer were created than initially reported must surely bring down interest rates. Our Investment Committee was looking at those odds yesterday too and saw that of traders betting on the September Fed meeting in 2026, over 96% believed that rates would be a full point lower4. That’s a bit more than a plurality or large majority. But inflation data is up, and Powell said at Jackson Hole a few weeks back essentially that inflation data was more important than unemployment data, revealing a bias to one dataset over another. This is why you don’t bet everything that rates will go one way or another and why we ALWAYS hedge in our fixed income portfolios. You don’t send everybody to one side of the ship when there’s something uncertain in the water.
In response to this oddity the stock market is soaring today. The Dow Jones is up 1.1% or over 500 points5. The S&P is up 0.6% and the Nasdaq climbed 0.4%. In fact, all three indices scratched all-time highs in intraday trading. As we’ve indicated in last week’s Market Mindset, we believe the market can and will go higher, even as valuations are stretched, but to make sense of the velocity of today’s move is difficult.
In some signs of actual progress, the Federal Reserve … (see, we can be fair!) has lowered its balance sheet by $39 billion in August to $6.6 trillion, which is the lowest since April 2020! In all its assets have come down by 26.4% or $2.36 trillion6. Unfortunately, this is just 49.2% of the $4.81 trillion in balance sheet expansion during Covid. It’s not all unwound, but again, there is some progress there and gives the cartel, ahem … fine upstanding bankers … slightly more room to maneuver with their monetary policy (failed Fed fairness test again).
In scary geopolitical news this week, Russia has violated Poland’s airspace, and an unconfirmed number of Russian drones have been destroyed in the Eastern European nation and NATO-member. This is a more serious provocation by Russia, while China continues to posture with its forces near Taiwan. Russia is awfully good at … being Russia … and trying to pick fights. Picture every awful bully from every budget family movie ever. (Red curly hair with a smirk, right?) Let’s continue to pray that they aren’t successful at it and we’ll be monitoring the events unfolding there as it relates to the international components of your portfolio. For now, we’re not making any moves.
Over the next couple of weeks we’ll be analyzing our Low Volatility and Monthly Cashflow Portfolios to give you the best edge we can give you to try and grow your accounts with a good return at an acceptable risk as well as try and deliver every cent of income that your dollars will produce at a reasonable risk. Help us rank what’s most important to you in that regard – if you have any questions or anxiety about your accounts, please give us a call.
Let us know who is special to you that you are trying to take care of when you’re gone. After all our country has been through the last two weeks, please hug your loved ones and tell them you love them. None of us are promised tomorrow. Let’s protect them in every sense, and that includes financially. May God protect and keep you all.
If you listen to us, we’ll change your financial world …
Sincerely:
Scott Wright
Portfolio Manager
The Wealth Training Academy
Sources:
1Evergreen High School shooting in Colorado leaves shooter dead, 2 hurt
3Psalms 34 NIV – Psalm 34 – Of David. When he pretended – Bible Gateway
5Stock market today: Live updates
6@KobeissiLetter
