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August 26, 2024
LABOR MARKET WEAKER THAN BELIEVED: Last week, the U.S. Bureau of Labor Statistics reported that the number of new jobs it reported for the 12 months through March of 2024 were off by a whopping 818,000, and not in the right direction. Payrolls were overestimated by 30%. This means that instead of averaging 242,000 jobs per month, the economy was adding 174,000. The sectors that saw the most downward revisions were professional and business services, leisure and hospitality, and manufacturing.
FED CHAIR SIGNALS RATE CUT: Last week, Fed Chair Jerome Powell stated, "The upside risks to inflation have diminished. And the downside risks to employment have increased....The time has come for policy to adjust." This was the clearest language yet that the Fed will likely begin to lower rates at the next round of meetings in September. The markets reacted positively to this announcement.
FED ANNOUNCEMENT PUSHES STOCKS HIGHER: The bad news is that the labor market is weaker than we thought (see above), but the good news is that it makes a rate cut in September much more likely (see above). On Friday, stocks soared, especially small and mid-cap stocks.
LONGER-TERM PERFORMANCE: Below are the annualized three-year and five-year numbers for these same indices.
U.S. HOME SALES: Existing home sales rose in July by 1.3%, the first increase in five months. But sales were down 2.5% from a year ago. The last time sales have been up year over year was July of 2021. The inventory of available homes rose slightly to 1.33 million, still well below the pre-COVID averages of 1.9 million. First time home buyers represented 29% of all buyers in July, same as June. 62% of homes sold were on the market for less than a month, similar to June (65%). Properties remained on the market for an average of 24 days in July, compared to 22 days in June.
LOWE'S PROJECTING LOWER SALES: Lowe's cut its full-year forecast last week after quarterly sales decreased. The company now forecasts this year's revenues of no more than $83.2 billion, down from earlier predictions of $84 to $85 billion. Lowe's cited lower do-it-yourself sales and a challenging economic environment. Lowe's sales have fallen for six straight quarters.
AHEAD OF THE CURVE: There are several trends going on in the financial and investment advising industry. We seem to be ahead of the curve on many of these trends. One trend is succession planning and the average age of financial advisors. According to a recent study by Envestnet, 80% of advisors do not have a succession plan in place. Perhaps because the president of Stonecrop used to be a practicing estate planning attorney, we have not suffered from this omission. In fact, I just signed new updated documents last week. We have plans in place if I live to be 100 or live one more day, and we look at other key players in the firm to make sure we have succession mind for them as well. Another trend we are beating is the average age of advisors. This number is still trending up and is well into the 60s. The average age of our five advisors is more than twenty years below the national average!
Another curve we have been ahead on is how we charge. According to the Envestnet survey, more than half of advisors (54%) expect at least 90% of their revenue to come from advisor fees by 2025. Currently, advisors receive an average of 71.1% of their compensation from asset-based fees. This has been trending up due to consumer demand for less commission-based products and more fee-based services. At Stonecrop Wealth Advisors, we are not even affiliated with a brokerage. This is by choice as we do not even want the option of charging a commission on an investment product due to the potential conflict and the appearance of conflict. The industry is beginning to catch up with this consumer preference.
LAST WEEKEND: Some of you guessed correctly that I was at Chimney Rock, North Carolina last weekend. The actual wedding was at a resort on Lake Lure. This is all about an hour from Asheville, North Carolina, an area I had never visited. It is beautiful. The first picture below is the view from Chimney Rock (you can see Lake Lure). It was a great wedding, although it was outdoors and a thunder storm threatened and ended up getting us all a little wet before it was all done (there was a downpour about 15 minutes after the service was over, but we were all under cover by then). The coda to the trip was that our flight from Asheville to Philadelphia was delayed, by two days! Because we needed to get back, and because all other flights were already full, we just decided to drive the rental car home, a nine-hour trip. We got to bed by 3:00AM.
A LESSON IN HUMOR: There are good jokes, and bad jokes (objectively speaking). I am going to give two examples and name names. I was at my friend Adam's house Friday evening and we and our wives were enjoying a Solo Stove fire and perfect weather. Adam and his wife have been in the house about five years, and at one point Adam points to a rather large rock and says, "That was just a pebble when we got here, but we watered it, and look at it now." That is a bad joke. Why? To be good, it has to be believable, even for a split second. I can't even say it was a good try. Last week, I was at a wedding. Danny, the son of good friends, was getting married. During the get together the night before the wedding, I walked over to congratulate Danny, whom I have not seen in four or five years, and congratulated him, and he said, "Now what is your name again?" He had me going for about one or two seconds, and I saw the smirk. That's a good joke! (But I'll get you back Danny).
Have a great week!
Our purpose is to honor God by helping our clients see the objective, find the path, and navigate past the obstacles to a more prosperous future.
Douglas R. MacGray, J.D., C.F.P. ®
President
Stonecrop Wealth Advisors, LLC
Direct | Cell | Fax
(610) 628 4545
"The key to longevity is to interact with other people." Carl Reiner
"Therefore encourage one another and build one another up, just as you are doing."
I Thessalonians 5:11 (ESV)
SOURCES:
AHEAD OF THE CURVE: : https://rethinking65.com/2024/08/12/advisor-compensation-now-overwhelming-comes-from-fees/?utm_campaign=8-20-24 RT65 Weekly%2C Compensation Comes From Fees&utm_medium=email&_hsenc=p2ANqtz--VMg2bve4OUkIgD-CnvBGSaZwkVG7b2MKDzlBHAaFjlwVSVBUCgImNgYUuL4sc8KX-6qkwDO7e_eMDk1tiaFvP2kCBMZYGvACXY3p8wP9u7qWN05E&_hsmi=320768247&utm_content=320589820&utm_source=hs_email
LABOR MARKET WEAKER THAN BELIEVED: https://www.cnbc.com/2024/08/21/nonfarm-payroll-growth-revised-down-by-818000-labor-department-says.html
U.S. HOME SALES: https://www.zerohedge.com/personal-finance/existing-home-sales-still-sluggish-weakest-july-2010-record-low-affordability
FED CHAIR SIGNALS RATE CUT: https://www.npr.org/2024/08/23/nx-s1-5082386/fed-jerome-powell-lower-interest-rates
LOWE'S PROJECTING LOWER SALES: https://gritcap.io/p/famed-investor-fined-sec
(c) 2024 A.D., Stonecrop Wealth Advisors, LLC, All Rights Reserved
Investment advisory services offered through Stonecrop Wealth Advisors, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission.
SDG
*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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