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I finally figured out the only reason to be alive is to enjoy it.
-Rita Mae Brown
Welcome to the Summer edition of our newsletter, covering July and August in one issue. This will also be my shortest newsletter in a long time, so you’re welcome. After a beautiful May that I didn’t take enough advantage of, it’s been pretty wet around here. For my quote this month I almost used the line from Allen Sherman’s Hello Muddah, Hello Faddah: “Camp is very entertaining, and they say we’ll have some fun if it stops raining.” Like most of you, I hope for better weather, because these are the months that make living or visiting Cape Cod worthwhile. So, my considered financial advice based on almost 30 years of experience in this business is: Enjoy it. Enjoy your summer, they’ll be plenty to worry about after Labor Day.
As much as the press had tried to tell us recession is imminent, or high interest rates were going to hurt the economy, or housing prices are going to collapse, or the early Spring bank failures are “just the beginning” – none of those things are happening. In fact, the overall economy, employment, stock markets, inflation, growth, all the things that measure how well we’re doing financially as a country are all still pointing in a positive direction. The GDP for the first quarter of this year, that I mentioned in the last issue was originally reported at 1.3% annualized growth, was revised up to 2.0%. The Federal Reserve announced that all 23 of the “systematically important” U.S. banks passed their stress tests, indicating they have sufficient reserves to operate without a problem even if we get a deep recession. Weekly unemployment claims that started to rise in late May and Early June have dropped back down to the 50-year low seen in early May as jobs are still plentiful.
Meanwhile, the stock markets are back in official “Bull Market” territory. As of this writing the markets measured by the S&P 500 are up over 15% year to date. While we’re still about 8% off from the December 2021 highs, things are heading in the right direction. Even with the Federal Reserve indicating it may raise rates another 0.5% before the end of the year, the markets continue to recover as the “recession is coming” sell off from last year looks more and more premature if not outright wrong. At the same time, these higher interest rates mean that the fixed income side of client portfolios is finally making some decent money without taking any more risk than when cash and bonds were paying 1-2%. Getting a 3.5-4% rate of return from that portion of your portfolio while the stock markets rise is a pretty good deal. As if that wasn’t good enough news, inflation also continues to cool. The May PCE inflation figure (that’s released the last day of June) was 0.3%. While the year-over-year number is still above 4% inflation, this monthly figure continues a month-by-month downward trend and indicates that inflation may have fallen into the 3’s. Still above the 2% number the Fed wants but quite a drop from the full 1% inflation rose in just the month of June last year.
Enjoy the summer and worry about tomorrow, tomorrow. Everything’s open, no Covid restrictions, restaurants still need help but not as desperately as last Summer. The sky might be raining, but the water still warmed up – and at least everything is green! My wife is going to be selling her artwork at craft fairs all over Cape Cod again this summer, you can see her schedule here. Let us know if you need anything; we are accepting new clients just like you! Have a great summer!
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