Welcome to our May 2023 Viewpoints, a monthly bulletin from PDS Planning to our valued clients and friends. Our goal with each issue of Viewpoints is to provide you with a wide variety of perspectives on life and wealth. Feel free to share with others.
Once we accept our Limits, we go beyond them
Take your pick of motivational ‘limit’ quotes. Congress is taking the debt ceiling talks to the wire. Janet Yellen has reaffirmed June 1st is the hard deadline to raise the ceiling as we are quickly reaching the borrowing and spending limits. Biden, McCarthy and other lawmakers have been working to come to an agreement to avoid a default, but the mood continues to swing from good to bad and back and forth. Many of the large financial institutions firmly believe an agreement will be reached to avoid a potential global financial crisis, though understand the risks.
- Vanguard – “It’s important to remember that volatility goes in both directions – up as well as down – and that the markets are efficient at processing news. Time in the markets is ultimately better for your portfolio than market-timing.”
- BlackRock – “While uncertainty around the debt ceiling can be unnerving for investors, we take comfort in the fact that the full faith and credit of the U.S. Treasury has always been honored, and BlackRock remains confident that a default on Treasury debt obligations is a very low probability outcome.”
- JPMorgan – “For investors, it may be tempting to move to the sidelines while debt-ceiling uncertainty remains. However, it should be recognized that this situation will, eventually, be resolved.”
- Goldman Sachs – “We do not expect a US default, but political brinkmanship makes the path uncertain.”
An Apple a Day
The Russell 2000 is a stock index made up of the 2,000 smallest companies by market capitalization. If you add all 2,000 market cap’s together, you get a total worth $2.7 trillion. Apple, a stock that is 1 company, is worth $2.71 trillion. Yes, earlier this month the market cap of Apple eclipsed the sum of all stocks in the Russell 2000 index.
It’s Starting to…Cool Down
Below is the inflation heat map, updated as of the end of April. Energy, food, and core goods have continued to cool off in the inflation category, bringing the headline CPI (consumer price index) to 5.0% – slowly towards the long-term 2%-3% goal. Core services like shelter finally took a note from the rest of the inflationary measures and took a step back down. They’ve remained stickier, but we’re hopeful the recent numbers hold true.
If You’re Still Interested
The debt ceiling may have further impact on interest rates, but the most recent data on the federal funds rate shows an expectation for rates to pull back in the next 12 months, following the current inflation track. It’s been a tricky line to walk, balancing interest rates and their impact on inflation and the economy. And the tight rope act isn’t yet over. There will likely be a popular call for rate cuts if inflation continues to fall, but the Fed needs to be careful with any economic and spending stimulation for the chance to jolt inflation higher.
Slow and Steady
After more than a decade of US stock outperformance, international equities have slowly but surely begun leading the charge. According to the visual below, international stocks have added 8% to what domestic stocks have done. The constant back and forth between US and international stock outperformance serves as a great reminder of the importance of diversification. It’s impossible to predict when performance will flip, so diversifying stock ownership across the globe allows investors to take advantage of outperformance – whether it’s domestic or international.
A (not so) Fun Baseball Stat
Teams are now 1/3 through the baseball season and the Guardian’s catchers remain historically awful offensively. Since the start of the 2018 season, the Guardians/Indians catchers rank dead last in weighted runs created plus (wRC+) with 65 according to FanGraphs. The metric is a measure of total offensive performance, adjusted for park effects and scaled so 100 is average. The score of 65 means the Guardians catchers create -35% less runs than average. 2023 has been no different. Before this last weekend against the Mets, Cleveland catchers had not recorded a single hit in the month of May. Cam Gallagher finally broke his 0-34 streak at the plate and Mike Zunino was not far behind.
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