Ladies and gentlemen, the weekend! In this space each week, Greg and I share some of our favorite articles, notes, and graphics from the past week along with our commentary. Please feel free to provide feedback and forward along to others if you enjoy. We appreciate you taking the time to read. 

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November Markets Review

“Equity markets continued their recovery from October’s lows, with [global] developed market equities gaining 7% and emerging market equities rallying by nearly 15%. The bond market also registered a strong month with yields in the US and Europe retreating significantly…

At the beginning of November, ongoing concerns about inflation and further central bank tightening were at the forefront of investors’ minds. Central banks did deliver another round of steep policy rate hikes. The Federal Reserve and the Bank of England raised policy rates by 0.75% to 4.0% and 3.0% respectively.

However, despite headwinds from tighter monetary policy, investor sentiment improved significantly after the release of US inflation numbers for October. The 7.7% year-over-year increase was below consensus expectations, fueling the market’s hopes that US inflation has now peaked and could prove less sticky than initially feared. The idea that falling inflation could mean that the end to the rate hiking cycle is not far off, gave both stocks and bonds a boost…

Macro data continues to point to a resilient US economy. Retail sales were better than expected, with growth of 1.3% compared to the previous month. We continue to observe a wide gap between very negative consumer sentiment and actual consumer behavior as excess savings and a resilient labor market currently appears to be prevailing over growing concerns about a loss of consumer purchasing power. The unemployment rate rose slightly to 3.7% in October and continuing jobless claims increased, but only moderately.

However, the slump in housing activity is concerning. Housing starts, which in April topped 1.8 million units (annualized) for the first time since 2006, fell to 1.425 million units in October. Existing home sales for October showed a further decline in sales. The sharp increase in the 30-year fixed rate mortgage over the year is depressing housing affordability to levels last seen in 2006.

US inflation cooled slightly in October. Prices of goods and autos fell, as supply chain disruptions continued to ease. Food, services and shelter inflation were stickier. Going forward we expect inflation to continue to ease as the global growth backdrop is weakening. The S&P 500 rallied 5.6% and US treasuries returned 2.7%.”

Stocks rally on Powell rate remarks



“Powell spoke [Wednesday] at the Brookings Institution, his last public appearance before the FOMC policy meeting in two weeks.

He said there's been no "clear progress" toward lower inflation just yet — and that rates may ultimately peak even higher than he thought just a few months ago. But in the last paragraph of his prepared remarks, he said the Fed could shrink the size of its rate hikes as soon as its December meeting.

The impact: Markets shot up — the S&P by over 3% and the Nasdaq composite by 4.4%.

Between the lines: Despite Powell's insistence that we haven't seen much progress in the inflation fight, that December comment made waves. "The signal that the Fed is going to slow down in December was unambiguous," wrote Krishna Guha of Evercore ISI in a research note.

Our thought bubble, via Neil Irwin: This was not a more fundamentally dovish message than the November FOMC press conference. Yes, but: Coming amid the loosening in financial conditions that followed the October CPI release, anything short of the tone of his August Jackson Hole speech — in which he called for more "economic pain" in the fight against inflation — gave investors reason to head back into risk-on mode.”

The futures market was already pricing in approximately a 75% chance that the Fed would be slowing its pace of interest rate hikes down from 0.75% to 0.50%, but Powell’s speech confirmed it with some slight wriggle room – “the time for moderating the pace of rate increases may come as soon as the December meeting.” That’s all it took to spark a nice rally in risk assets and further moderating in bond yields.

Is Long-Term Care Insurance Worth It?

“Should I buy long-term care insurance?

Let me start by saying this is a deeply personal decision. Anecdotally, most of the people I see purchase long-term care insurance are people who have had a family member go through a major health event and needed long-term care. They understand the stress, cost, and burden of caring for another person and how a long-term care insurance policy could help.

The biggest benefit I see in buying a long-term care insurance policy is that paid caregivers are hired sooner. What I often see with couples who don’t have a policy is the other spouse trying to give care for an extended period of time, which lowers their quality of life, emotional well being, and health. Alternatively, a family member steps in to help, such as an adult child, often a daughter. They often reduce work hours, quit their job, or rearrange their life to help.

If a family member has a long-term care insurance policy, people are eager to use the benefits, so they can hire in-home help or transition to an assisted living facility sooner. It alleviates the burden put on other family members.

Besides that benefit, there is the leverage provided by insurance. Although you may be able to invest what you would have paid in insurance premiums over many decades and come out ahead, there is nothing that says you can’t have a major health issue come up at a younger age. If that happens, a long-term care insurance policy can help considerably.

There is also the peace of mind factor. Some people appreciate knowing they have a policy and will not need to spend as much from personal resources if they need long-term care.

As for whether it makes sense financially or emotionally for you, that’s up to you. It’s impossible to say if you would come out ahead by purchasing a policy because nobody knows if or when you will need care, for how long, and what type of care. If we knew what was going to happen in life, we wouldn’t need insurance.

You need to consider what it means for your financial plan with and without a policy, which could include modeling a few different scenarios in your financial plan to see how it could change your probability of success.”

This was an incredibly detailed article on long-term care insurance that breaks down costs, usage rates, policies, pros, cons, rules, etc. It’s worth exploring, especially for those in their late 50’s or early 60’s.

"In the current state of the economy, the Fed has decided it doesn’t have the luxury to act slowly. Inflation has risen rapidly to a level not seen in decades. The central bank has chosen to slam on the brakes. This less-incremental approach raises the risk that Fed officials overdo rate increases, plunging the economy into a deeper recession than is needed to tame inflation.

The Fed this year has been raising rates at the fastest pace in four decades. Chairman Jerome Powell has said this pace is appropriate “given the persistence and strength in inflation and the low level from which we started.”

Thanks for reading. Have a great weekend!

RBG Wealth Advisors LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.