March 2023 Investing Insights
Before we dive in, don’t we live in such an amazing place where adventure is around every turn? Such gratitude for this magical place and the people we meet that warm our hearts and inspire us nonstop.
Finance = Situation. Month after month it’s the same narrative. What will the Fed do? How long will rate hikes continue? How will inflation data continue to trend?
The media loves to hype the Fed’s every word which is only fueling the volatility fire in markets. Now it must digest a longer season of rate hikes at least into June which it hadn’t hoped for potentially to a 6% Fed Funds Rate by July.
On top of these questions, two more. With global growth, will this mean stronger raw material and energy prices? What happens if rental markets collapse as incomes aren’t gaining at the rate of inflation and layoffs continue?
The Effective Fed Funds Rate is currently 4.58%, and inflation is at 6.4%, down .1% from December and off the record high in June 2022 of 9.1%. The Fed’s goal has always been to rein in inflation to the 2% target. Pundits feel the Fed isn’t doing enough and obviously acted too late. We pay the price.
80% of S&P 500 earnings are in: 60% beat sales estimates, 70% beat EPS. This is below the historical average but stronger than expected.
On Tuesday, February 21, the Dow Jones Industrial Average dropped 2.1%, the S&P 500 dropped 2%, and the NASDAQ dropped 2.5%. Walmart and Home Depot have a cautious outlook due to customers spending money on food, not on electronics, apparel, and home improvements due to inflation and changing habits. What this says to us? It is about basics now, not fluff.
Russia sanctions continue. VGO, vacuum gas oil, necessary for processing crude oil comes primarily from Russia and will be impacted by sanctions, thus creating a shortage. Gas is down compared to over $5 a gallon in June but still 40% up from what it was two years ago. Diesel and jet fuel have doubled and quadrupled in price respectively. Demand for oil continues to increase after the Covid shutdown minimized demand. “Gasoline is going to be crazy tight this summer” should Russian VGO disappear from the market, said Amrita Sen, Director of Research at the consulting firm Energy Aspects. Energy will continue to be a factor and a drag on the economy and markets until it is resolved as I have stated consistently over the last year.
Clients. I’ve enjoyed meeting with all of you for annual reviews and outlining the power of the new financial planning tool we’ve invested in at Lion’s Eye Wealth. Many of you are coming to understand how fluid this allows us to be and on point with any changes in the “facts” of your financial circumstances as well as goals. It’s been fun for me to share this tool as well as the detailed reports that to my knowledge are better than many big firms, certainly my former big firm. I’ve also been updating Investment Policy Statements (IPS) which review your goals and parameters for investing.
What to do now? To sum up sentiment, time will tell. My suggestion is to allow me to smooth the ride for you investment wise through this process through active and tactical investment strategies. For those who are more conservative from a risk perspective and after capital preservation, an alternative investment in dividend plus has been a solid option. For those on the aggressive side of the risk scale, a reminder to take no undue risk for reward. I’m happy to review each of your investments and strategies if you have questions.
Lastly. If you’ve ever checked the home page of Lion’s Eye Wealth, you’ll notice a clear delineation of what we stand for, how we are different, and the kinds of clients we like to serve. In short, we attract doers, dreamers, founders, adventurers, thinkers, and leaders – we don’t find ourselves dealing with many that just follow the herd, passive model portfolio advisors serve that niche, not us.
It has been a pleasure getting to know clients, prospective clients, and those we work with as partners from CPAs to estate planning attorneys to others in finance. To this end, in the coming weeks, we will be launching a series of lifestyle interviews with people whose stories we feel should be shared – those that represent a spirit of adventure that is in keeping with the ethos of Lion’s Eye Wealth. After all, each month we come to you with ideas on how to fuel your life’s many adventures – put simply, this is our goal. We also hope to have local impact in the communities we serve and are continually inspired by. If you have any ideas of people we should interview, we’d love to hear from you!
With the spirit of adventure and creativity,
Lisa Durant, President
