Josie Hodges

You Can’t Always Get What You Want (or Can You?)

As the world mourns the recent passing of Rolling Stones drummer Charlie Watts, we are
reminded of one of the band’s classic songs which has an underpinning theme about how hard
it is to find happiness; no matter what you have, you always want more. Here at Secured
Retirement we wouldn’t necessarily agree with this statement since we have the fortune of
working with many happy and satisfied clients that are able to live the retirement of their
dreams.
The stock market is currently giving investors what they want as major indices continued their
march upwards last week, again reaching new highs. The gains were attributed to more
optimistic news regarding the recent surge in Covid cases with reports new cases have possibly
peaked in some areas, providing comfort to investors worried about another round of pandemic induced restrictions. Concerning news out of Afghanistan did drive the markets lower for one
day but as that situation nears the resolution deadline of month-end, it should only have limited
impact on the markets and barring any unanticipated major event will most likely not be a large
factor to investors going forward.
Fundamentally, strong earnings reports continue to roll in as do upward revisions to future
revenue estimates. This is evidence businesses are continuing to grow in the post-pandemic
world and the economy continues to strengthen as we transition from recovery mode to
expansion mode. We are positioning portfolios to profit from this growth in a judicious manner,
being mindful of risks.

Inflation Continues

We continuously monitor economic data releases for clues about the direction of the economy.
Reports for both new and existing home sales came in stronger than expected, indicating the
housing market remains strong. Home prices continue to show solid increases as buyers still
outnumber sellers, but the price increases are at a slower pace than what was seen earlier this
year. Orders for durable goods dipped slightly which was a surprise but is not cause for
concern unless this is the beginning of a trend. Most noteworthy was the modest year-over year change in Personal Consumption Expenditures (PCE), which is the Fed’s preferred
measure of inflation. This measure remains elevated and above the Fed’s comfort zone,
leading us to believe the monthly bond buying which has been in place since the beginning of
the pandemic will be reduced prior to the end of this year and completely phased out next year.
The PCE price level is now well above pre-pandemic levels and not showing signs of slowing
down, indicating the current inflation and price increases are not just transitory from the
pandemic recovery but remain a longer-term concern.

Looking Ahead

The week before Labor Day marks the end of summer in many ways and has historically been a
quiet one in the markets with lighter than average volume. Any large news related to geopolitical
events or coronavirus has the potential to cause some short-term market volatility, but we don’t
expect that to be the case. After Labor Day, market volume and activity are expected to pick
back up with September and October historically being two of the most volatile months of the
year. Jobs and payroll data will be released on Friday and could move markets if they deviate
greatly from expectations but even then, the impact most likely will be muted given it is the day
before a holiday weekend.
We continue to work hard to ensure our clients can get what they want when it comes to a
worry-free and secure retirement. This is accomplished by diligently following the markets,
positioning portfolios accordingly and keeping our clients informed of what is happening.

Have a wonderful week!

Nathan Zeller, CFA, CFP®
Chief Investment Strategist
Secured Retirement
nzeller@securedretirements.com

Please contact us if you would like to review your individual financial plan or learn how the
TaxSmart™ Retirement Program can help you.

info@securedretirements.com
Office phone # (952) 460-3260

The Thunder Rolls

Even though it has been an unusually dry summer across the country, we still have experienced a few thunderstorms or can at least remember thunderstorms of past summers.  Some can be calm with the thunder being a low rumble in the distance and others can be violent with loud thunder and sizzling lightning.  The magnitude of impact certain events have on the market is comparable to the intensity of a thunderstorm, which was evidenced last week with a whirlwind of economic and geopolitical events.    

Headline-driven sell-offs midweek led the major stock indices to end the week slightly lower.  We witnessed a dire situation unfold in Afghanistan, but of larger impact to the markets was the Federal Reserve’s (“the Fed”) indication they plan to “taper,” or reduce, bond purchases later this year and eventually end them all together.  The reason this is noteworthy is because the Fed has been purchasing $120 billion worth of bonds monthly since the beginning of the pandemic to help provide stimulus to the economy; this is commonly referred to as quantitative easing or “QE.”  Buying bonds reduces the supply in the open market, causing prices to rise and keeping interest rates low.  This also provides a greater supply of money into the system, which coupled with low-interest rates stimulates the economy.  When the bond-buying is reduced, and eventually ends, this stimulus will no longer occur.  The stock markets reacted negatively to this announcement this week, but this can be viewed as a positive signal since it indicates the Fed feels the economy is strong enough to continue growing on its own and no longer needs the stimulus. 

The economy is transitioning as we move past the pandemic recovery and into a more mature phase with markets shifting from recovery mode to expansion mode.  The transition between stages in the economic cycle has implications for various asset classes and sectors, which is why we remain vigilant and active in managing client portfolios to ensure they are optimally invested for where we are in the cycle. 

The Consumer

Key economic releases last week were focused on retail sales, which came in below expectations. This was blamed on the rise of coronavirus cases from the Delta variant, however, it should be noted this data was from the prior month, much of which took place before the recent surge in cases was making headlines.  It was interesting that many retailers which reported quarterly earnings this past week exceeded estimates and provided higher guidance for future earnings.  The message from individual companies as consumer spending remains strong and is expected to continue through the rest of the year. The discrepancy between the monthly economic releases as well as the variances in individual company earnings reveals why individual security selection in a portfolio can be crucial.  Consumer spending is a strong driver of the economy so we will continue to monitor this data for signals about the direction we are headed. 

Looking Ahead

The major economic release this upcoming week will be quarterly GDP, which is expected to reflect another strong quarter of growth.  There will also be data released for existing home sales and durable orders, however, what has the potential to move the markets would be further geopolitical events and the attention given to the surge in Covid cases.  The market seems to be pricing in the downbeat headlines regarding the Delta variant so if the news becomes more optimistic we could see a quick upswing in the market. 

At Secured Retirement, we keep a keen eye on what is happening in the world and what impact that has on the markets.  We use this information to position our portfolios so they can weather all storms that may arise. 

Have a wonderful week!

Nathan Zeller, CFA, CFP®

Chief Investment Strategist

Secured Retirement

nzeller@securedretirements.com

Please contact us if you would like to review your individual financial plan or learn how the TaxSmart™ Retirement Program can help you.   

info@securedretirements.com
Office phone # (952) 460-3260

The immortal words of Buzz Lightyear from the Disney Toy Story movies ring true for many of us who perhaps dreamed of going to space when we were children.  Now with advances in science and technology, this is becoming a reality, most notably with the recent craze of billionaires blasting themselves into space.  The stock market has a similar attitude – very little can stand in the way of it continuing to rocket higher and achieve dizzying heights.  Last week was no different as the market remained on its upward trajectory, reaching all-time highs. Delta variant concerns remain in the headlines, but thus far have not held back the market from shooting higher.  Even with the quarterly earnings reports winding down, there was no shortage of market-moving events. 

The Senate passed a $1 trillion infrastructure bill, which is now moving to the House.  The impact this legislation will have on the economy is debatable since it should boost economic activity with further stimulus in the form of increased, but will also add to the national debt, inhibiting future growth.  At this point, we feel the impact to the overall economy will be slightly positive, especially for those companies that benefit from infrastructure projects such as machinery and raw materials.

While the market indices reached all-time high levels, the rally has not been broad-based, with a divergence in performance between sectors and individual stocks.  As the euphoria of the post-pandemic rally finally seems to be wearing off, fundamentals and valuations are coming back into the forefront.  Sector and stock selection becomes increasingly important, which is why we spend countless hours conducting research to ensure our clients’ portfolios are optimally invested participating in stock market rallies while protecting against downturns. 

Inflation

One of the central themes we stress is how inflation will impact future spending power and investment portfolios. Last week the key economic releases were inflation-related with the Consumer Price Index (CPI) and Producer Price Index (PPI) both showing price increases at levels not seen in over a decade.  The month-over-month increases in these numbers are slowing, which could be an indication the peak level of inflation was reached attributable to the post-pandemic recovery.  However, it is worth mentioning that inflation remains at an elevated level and there are no signs it will be letting up anytime soon.  We continue to stress the importance of preparing for higher prices, both in terms of individual income and spending as well as positioning investment portfolios accordingly to protect against inflation and capitalize on the opportunities it presents. 

Included in the monthly inflation data releases from the Bureau of Labor Statistics (BLS) was CPI-W, which is a measure of the measure used by the Social Security Administration to calculate the annual cost of living adjustments (COLA).  The change in CPI-W from a year ago was 6%, putting next year’s Social Security COLA on track to be one of the largest in decades.  

Looking Ahead

The key economic releases this week include retail sales, capacity utilization, and housing, all of which should provide further clues on the strength of the post-pandemic recovery.  The data released is from the previous month so any impact on consumer spending and retail sales from the recent coronavirus resurgence will not be reflected in this set of releases. We keep a close eye on housing data as it can be viewed as a barometer of consumer sentiment, as well as provide clues to any improvement in supply chain issues lingering from the pandemic. 

At Secured Retirement, we continue our tireless work of maintaining a high-level view of the markets and economy while digging deep to research those assets and sectors we feel will benefit from current market themes so we can position our clients’ portfolios accordingly.  Not everyone will have the opportunity to blast off into space during their lifetime, but when it comes to investing, we can shoot for the stars and should at least hit the moon.    

Have a wonderful week!

Nathan Zeller, CFA, CFP®

Chief Investment Strategist

Secured Retirement

nzeller@securedretirements.com

Please contact us if you would like to review your individual financial plan or learn how the TaxSmart™ Retirement Program can help you.   

info@securedretirements.com
Office phone # (952) 460-3260