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  • Writer's pictureDoug MacGray

Missiles, Taxes, Inflation, Oil Prices, a Funeral and a Wedding

April 15, 2024


GEOPOLITICAL EVENT:  I return to my writing later than usual to briefly acknowledge what you will all be seeing and reading about heading into the new week: Iran's direct missile attack on Israel. There will be a lot of focus on this in the news. How will Israel respond? Was it just for show (the U.S. State Department immediately said it was mostly "performative")? Will oil prices spike? How will the broader international community respond to Iran, Israel? Iran has already suffered a selloff of Iran's currency and stock market. Iran's currency fell to an all-time low over the weekend. Both sides of this conflict have plenty of incentive to pause without further, major escalation. But only time will convince the world of that. For the weeks and months ahead, this region will be on high alert, the the world will be watching, and hoping and praying for peace. We will be watching futures markets and market openings in a few hours in Asia, Europe and eventually the U.S. to see how overall investors will react.


TAX DEADLINE:  On Monday, income taxes are due for U.S. taxpayers. I hope this does not come as a surprise to any of you.  If so, you still have a few hours!


NOT SO FAST:  Inflation is not going away quite yet. The Consumer Price Index (CPI) rose 0.4% in March, and the annual figure increased to 3.5% (from 3.2%). The increase was led mostly by energy (up 1.1%) and shelter costs (up 0.4%). The core CPI (which is CPI minus food and energy costs) also rose 0.4% but was unchanged at 3.8%. This is the index watched more closely by the Fed. This is the third straight month of inflation numbers coming in above expectations. This, of course, raises concerns that the Fed will postpone rate cuts and that the "last mile" of inflation declines may take longer than many had wished. The stock market declined on the news.


RATE CUTS:  To give you one example of a large financial institution's response to the inflation news, Goldman Sachs now predicts the first Fed rate cut will not happen until July, and then there will be one more for the rest of 2024.


STOCKS REVERSE COURSE:  U,S. stocks had their worst week in a while with broad declines across the board. All eleven sectors of the S&P 500 declined, the first time that has happened since last September. The weekly malaise was caused in large part by the inflation numbers, and the resulting loss of hope that the Fed will begin cutting rates soon. Some large U.S. banks reported earnings last week. They reported good earnings but forecast slower growth going forward because of interest rates likely staying high for a while. For the next few weeks, investors are going to try to determine where stock prices should be given the potential for fewer, if any, rate cuts this year.



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



SINGAPORE AND SOUTH KOREA'S CENTRAL BANKS HOLD:  Singapore's central bank announced last week that it is keeping its interest rate unchanged due to the likelihood of inflation staying too high for the next few quarters. Meanwhile, South Korea's central bank met last week and announced the same result: no change due to stubborn inflation.


OIL PRICES RISE ON IRAN FEARS:  Reports came out late last week about Israel potentially being targeted by Iran for a direct, imminent, attack. The West Texas Intermediate index rose to over $87 per barrel. This will not help with inflation.



HOW DOES THE FEDERAL GOVERNMENT SPEND ITS MONEY:  Here is a rundown of where every dollar of U.S. government spending goes:

  • Social Security:       $0.22

  • Health:                      $0.14

  • Medicare:                 $0.14

  • National Defense    $0.13

  • Income Security:    $0.13

  • Net Interest:            $0.11

  • Veteran's Benefits: $0.05

  • Transportation:      $0.02

  • Commerce:             $0.02

  • Other:                     $0.04


MISTAKES IN RETIREMENT PREPARATION:  The Wall Street Journal posted an article this week entitled "Retiring in the Next 5 Years: Avoid These Financial Mistakes."  One of the six mistakes the author recommends avoiding is "overspending on children." To that, I respond, "Amen and Amen!" As I often express it to clients, "One of the best gifts you can give to your children is ordering your finances in such a way that you are never a financial burden to them, and they never worry about your financial future." Even if it means saying 'no' to a grown child's needs or desires, keep in mind that they have one thing you do not have: decades of money earning years. Love them, help them as appropriate, but not at the cost of your long-term financial stability. I recognize that each situation is different. I have a friend in his mid-70s  (I'll call him "Vince") who is finally winding down his full time work (he runs his own business). Why did he work so long? His sister, and his daughter, due to tragic health issues, had severe financial needs, and Vince decided that if he kept working full-time he could take care of them and tend to his (and his wife's) financial needs. Recently, his sister passed away, and his daughter's health situation improved to the point that she no longer needs his help. I have great respect for his generosity. I am not arguing against that kind of love and generosity. But do not put yourself in a position where your children need to support you financially if you can avoid it.  


A FUNERAL AND A WEDDING:  On Friday, I went to the funeral of a client, and on Saturday, I went to a wedding of two clients. I guess you can call that an emotional roller coaster. The funeral was for Dave, a client who succumbed to Parkinson's Disease. It was one of those funerals where you walk out inspired. Both his son and his daughter gave testimonials. They both spoke of the deep and meaningful life lessons they learned from their dad. One short quip sums up Dave well. Dave was a home improvement contractor who loved his work, and his customers. He raised his kids in the church. At one point his daughter, as she testified at the funeral, asked (in the judgmental tone of a young person who thinks she knows more than her dad), "Why aren't you more involved in ministry?" He paused, and he calmly and thoughtfully answered, "You know, I've always thought that my work is ministry." I had the privilege to observe Dave at his work, and I would agree with him. His son remembered his dad saying at one point, "If there is anything you want to do during your life, get to it. You turn around a couple of times and you wonder where the time has gone." Rest in peace Dave. The wedding was of two awesome young people whom I have had the privilege to know for over a decade. It was an absolute privilege to be a part of the celebration for such a kind and loving pair of people. Congratulations Sammy and Sean!  




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. ®

President

Stonecrop Wealth Advisors, LLC

Direct | Cell | Fax

(610) 628 4545


"Survival is difficult, but one has only two options if put in a survival situation:  give up and die or fight like hell and live."  Lou Conter, last survivor of Battleship U.S.S. Arizona, who passed away last week at age 102


"[C]almness can lay great offenses to rest."  Ecclesiastes 10:4


SOURCES:

HOW DOES THE FEDERAL GOVERNMENT SPEND ITS MONEY: https://www.visualcapitalist.com/where-does-one-u-s-tax-dollar-go/

RATE CUTS: gs.com


(c) 2024 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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