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  • Writer's pictureDoug MacGray

Higher Borrowing Costs, Strong Labor, and Portugal

October 22, 2023

SO HARD TO WATCH: This email focuses on economic and market news and financial planning issues. We largely stay away from political and geopolitical issues unless they affect these things. Please know that we pay attention to wars, conflicts, violence, unrest, protests and the like. Like you, we are sickened by what we now see. In Ukraine, we have seen soldiers killing soldiers with way too much collateral killing and suffering caused to civilians. Currently, in Israel and Gaza, we saw a horrific attack directed mostly at civilians followed by the seemingly inevitable response that is causing death and suffering to more civilians and combatants. We hope and we pray that this current war will end quickly with minimum further death and suffering and in a manner that creates the opportunity for a lasting peace. Peace, of course, is good for markets and the economy. Way more importantly, it is important for humanity.


“Inflation readings turned lower over the summer, a very favorable development. The September inflation data continued the downward trend but were somewhat less encouraging. Shorter-term measures of core inflation over the most recent three and six months are now running below 3 percent. But these shorter-term measures are often volatile. In any case, inflation is still too high , and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal.”

Excerpt from October 19 speech (emphasis added)

INVESTORS WATCHING BORROWING COSTS: The Fed last raised rates at the end of July. Since then, the yield on the 10-year Treasury has risen by more than a full percentage point. That is an unusually high jump in such a short period. That causes borrowing costs to go up without the Fed raising rates. Higher borrowing costs, and their potential effect on the economy, along with the rising concerns about the conflict in the Middle East had stock investors in a cautious mood all week, and it showed in lower prices. Once there is any sign of an actual cooling of the economy, it is likely that bonds will rally. First quarter corporate earnings reports have been solid. Only 17% have reported so far, but among those there has been average earnings growth of 4.9% from a year ago. 73% have reported earnings above Wall Street forecasts. The problem is that most investors assumed solid earnings reports so it is not pushing markers higher for the most part.

LONGER-TERM PERFORMANCE: Below are the annualized three-year and five-year numbers for these same indices.

INITIAL UNEMPLOYMENT CLAIMS DROP: Last week, less than 200,000 people in the U.S. filed new claims for unemployment. The actual figure was 198,000, a sign of a very healthy labor market. Just before COVID, we had gotten down to this range of initial unemployment claims, and we were all celebrating. Now, it makes us all worry that the Fed will keep raising rates, and it causes the opposite of celebration. The Fed has gotten us all rooting for people to lose their jobs. It feels a bit like Alice in Wonderland.

SALES OF EXISTING HOMES FALL AGAIN: Sales of existing homes fell again in September. Such sales are now at their lowest in 13 years. For all of 2023, sales are on track to be the lowest since 2011. Increased borrowing costs are weighing on demand, but they are also limiting inventory because homeowners are reluctant to sell and move. The low supply is keeping prices high.

ARE ECONOMISTS RIGHT?: In July, the Wall Street Journal conducted a survey of business and academic economists. 54% predicted a recession within the next twelve months. The Wall Street Journal just conducted that survey again, and the percentage of economists predicting a recession is down to 48%. They cite receding banking turmoil, labor market resilience and rising real income. This coupled with declining inflation and a Fed that is probably finished with raising interest rates leads more economists to become a tad more optimistic.

LESS COVID, LESS PROFITS: Two major U.S. corporations are straining under the pressure of less profits from COVID-related products. Rite-Aid filed for bankruptcy. In the latest quarter, its profits declined to $5.65 billion from $6.01 billion in the same quarter last year. In its most recent forecast, it revised its 2024 revenues down. The number one driving force behind its loss of revenue growth is the decline in COVID tests and COVID vaccines in recent months. It appears they staked too much of their success on COVID continuing as it has been. Rite-Aid was not well-positioned to absorb these losses after years of losses, failed mergers, and lawsuits related to the opioid epidemic. Similarly, Pfizer reduced its annual earnings last week, citing decreased demand for its COVID-related products. They lowered their anticipated 2023 sales from a high of $70 billion to $61 billion, citing the reduction entirely to their COVID products declining in demand.

KING DAVID CAN TEACH US ABOUT ESTATE PLANNING?: I was asked by a magazine that is targeted toward Christian institutions of higher learning to write an article on estate planning, and it has now been published. You can read it here.

FINALLY DOING IT: Below is a picture of Joseph “Joe” Bent, or as I knew him, “Grampy.” His family came to the U.S. in the early part of last century from Portugal. My great grandfather, Arminio Bento changed his name to Herman Bent, and the family went by Bent ever since, my mom’s maiden name. I have wanted to see this country for a long time, and circumstances finally lined up in favor of such a trip, and here we are! We have just arrived, and I am writing from Lamego.

Have a great week!

Our mission is to help you see the objective, find the path, and navigate past the obstacles to a more prosperous future.

Douglas R. MacGray, J.D., C.F.P. ®


Stonecrop Wealth Advisors, LLC

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(610) 628 4545

“If you want peace, you don’t talk to your friends. You talk to your enemies.” Desmond Tutu

“A time for war and a time for peace.” Ecclesiastes 3:8








(c) 2023 A.D., Stonecrop Wealth Advisors, LLC, All Rights Reserved

*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets.

*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States.

*Bloomberg U.S. Aggregate: This is a measure of the U.S. bond markets.

Investment advisory services offered through Stonecrop Wealth Advisors, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission.

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