Letter to Stakeholders, August 2022
You can read (or LISTEN) below:
Thursday, August 4, 8:36 am EST. True to form, stock market volatility gives and takes. July’s gains in your portfolio, nearly to the dollar, erased June’s losses. Congratulations. So far August has also been “positive” but expect the ups and downs (volatility) to continue. The short-term outlook of the global economy is hard for even the paid pundits to predict.
What Drives Stock Market “Volatility?”
At least once every few months I deliver a pro-bono presentation on personal finance topics. Last month I was asked to specifically deliver a talk on how to perform “advanced” trading in a “volatile market.” The irony is that being “advanced” at anything begins with a focus on the basics i.e. the fundamentals. This is what great athletes like Michael Jordan and Tom Brady understood. In my talk I too focused on the fundamentals that consistently drive short-term ups and downs (volatility) of the market (though not my own trading behavior).
Some of the things that drive volatility include the announcement of the federal funds rate (increase/decrease), Gross Domestic Product (GDP) readings, consumer and business sentiment, interpretations of the unemployment rate, and inflation expectations. Perhaps nothing makes stock market hearts skip beats more than corporate earning's reporting. At the end of each 3-month cycle (quarter), hundreds of public firms report how much money they made (in the past) and how much the expect to make (in the future). Analysts – people whose job it is to guess these numbers – either upgrade or downgrade company stocks based in part on these reports. If enough “bell-weather” companies like Walmart and Apple (for example) report bad earnings or profits then the analysts, followed by the media, warn of recession. But over the past few weeks, the corporate earnings news has been better than expected. Combine this reality about corporate earnings with analyst’s hopes that the Federal Reserve Board will begin cutting – instead of raising – the federal funds rate in 2023 and what do you have? The hard “bounces” up and down that we are seeing in your portfolio. In the short-term, expect the volatility to continue.
Are We in a Recession?
Last month and the month before then, we touched on what determines a recession. Like the great 1994 film, the Shawshank Redemption, there are some words that are just “made up words…a politician’s words.” “Recession” is one of them. No matter what your favorite pundit says, the arbiter of whether we are in a recession is the purview of the nonpartisan network of over 1,700 academic economists called the National Bureau of Economic Research (NBER).
According to their website the NBER goes far back to 1920 and they were responsible for recruiting Simon Kuznets, the Nobel Prize winning economist who authored the Gross Domestic Product (GDP) metric. But as I mentioned in June, Kuznets admitted a long time ago that GDP is not a good measure for economic well-being. And if that’s the case, it’s possible that “recession” is not a word to get worked up about either.
You hired us to oversee your assets, liabilities, income, expenses and how all of those elements of your financial life work together. Your plan, not an economic – or political? – catch phrase will remain your focus (and ours). If your plans change, contact us. And if a friend or relative is worried about the economy, have them talk to me directly: Jason@JasonHowell.com
“Folklore says if you fold 1000 origami cranes, you get a wish. I have a big wish. I wish for world peace. So, I find paper. I cut it into a square. I write a secret wish on the paper. I fold it into an origami crane. I give it away. This is my simple yet powerful project, 1000 Cranes 4 Peace.” – Arlene Butler
This month’s stakeholder spotlight shines on Arlene Butler, psychotherapist and longtime client. Arlene is sharing her love of origami cranes with the Museum of Shenandoah Valley from July 26ththrough October 9th. From their website:
For centuries, the origami crane has served the purpose of touching hearts, encouraging connections, and spreading hope. Used here, everyday objects such as folding paper fans, mirrors, and blocks from a children’s game highlight the shared foundations and experiences upon which common hopes and wishes for peace are built. Visitors are invited to explore and engage with the installation and become inspired to individual action for peace; personally, locally, and globally.
One of these weekends, Doug and I plan to bring our families to see the exhibit. Join us!
Have a meaningful day,
Jason J. Howell, CFP®, CPWA®, CSRIC®
Jason Howell Company is an independent, family wealth management firm run by two owners who believe you should feel good about money.
Jason J. Howell, CFP®, CPWA®, CSRIC® and Douglas W. Tees, MBA, CFP® are each married to patient wives and are dedicated to their kids. Jason and Doug have built a firm with a great reputation. The firm is based in Northern Virginia but serves clients (virtually) all throughout the United States.
Our clients are “first generation wealth” and can feel guilty about how much they make and how much they spend compared to how they grew up. They are also concerned about how their wealth affects their sibling relationships and their kids.
We facilitate feeling "good about your money" in three ways:
- Family Governance: We walk the principles through a process that gets them talking about what it was like to grow up with money, how they pay bills and save today and what they want their family legacy to sound like. This turns into a “Family constitution.”
- Sustainable Investing: We match the values derived from the “Family Constitution” to a sustainable investing strategy that incorporates an adaptive efficient market theory with environmental, social and governance factors
- Proactive Philanthropy: Many of our clients will have a little extra, even after they achieve their family’s personal goals. We show them how much they can afford to be giving while living to the people and causes they care about
To feel good about your money, just book an introductory call here: Introductory Call