Weekly Market Commentary June 14, 2022

Hello June

Housekeeping

Office Move – After many years in Bellevue we have closed our offices and are relocating to shiny new office space in Kirkland. Our new address is:

Klevens Capital Management
4040 Lake Washington Blvd, Ste 314
Kirkland, WA 98033

Phone numbers and emails remain the same.

Update on Move – Work continues on the new space with expected move in date to be Tuesday, July 5 and Wednesday, July 6. Although we may still be in a state of disarray, we hope to have our new offices open for business on Thursday, July 7. Thank you so much for your patience and we relocate to our new home in Kirkland!

Fast Facts – Seattle

Seattle is home to the world’s longest floating bridge! The Evergreen Point Floating Bridge (also known as the 520 Bridge and the Governor Albert D. Rosellini Bridge) connects Seattle to the eastern suburbs of Bellevue and Kirkland. It has a total length of 15,580 feet, with a floating section that spans 7,710 feet. It’s a Seattle fact that the 520 is the longest floating bridge in the world.

Seattle (possibly) had the world’s first gas station! This Seattle fact is a point of contention among historians, but the city may have had the world’s first gas station. In 1907, John McLean of Standard Oil of California (now Chevron) opened a refueling station at what’s now Pier 32. Prior to this “filling station,” car owners had to buy gasoline in boxes at stores. McClean and an engineer designed a system that allowed drivers to fill their cars directly from a large onsite tank. Some believe that this Seattle location was the first true gas station, while Shell cites one of its subsidiary’s St. Louis facilities built in 1905 as the world’s first. While the world will never know the answer, it’s very cool that Seattle had either the first or second gas station in history.

Seattle coffee is far more than just Starbucks! People all over the world associate Seattle with Starbucks coffee. Starbucks is, after all, the largest coffee chain on the planet. Seattle fact: Starbucks has more than 20,000 locations in 62 countries. There’s much more to Seattle coffee than Starbucks. The city is home to several renowned coffee roasters. Caffé Vita Coffee Roasting Company, Caffe Ladro, Victrola Coffee Roasters, Lighthouse Roasters, Stumptown Coffee (now owned by Peet’s), Herkimer Coffee, Seattle Coffee Works, and Zoka Coffee Roaster are just some of the small, but highly respected, coffee roasters that call Seattle home.

Weekly Focus – Think About It

pink flowers“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.”
Peter Lynch, former portfolio manager

The Markets

Inflation is proving to be far more tenacious than markets had hoped.

The idea that inflation peaked in March was put to rest last week when the Consumer Price Index (CPI) showed that inflation accelerated in May. Overall, prices were up 8.6% last month, an increase from April’s 8.3%. It was the highest inflation reading we’ve seen since December 1981.

The most significant price increases were in energy (+34.6%) and food (+10.1%). That’s unfortunate because the War in Ukraine has a significant influence on food and energy prices right now, and no one knows how long it will last. In April, the World Bank’s Commodity Markets Outlook reported:

“The war in Ukraine has been a major shock to global commodity markets. The supply of several commodities has been disrupted, leading to sharply higher prices, particularly for energy [natural gas, coal, crude oil], fertilizers, and some grains [wheat, barley, and corn].”

With inflation rising, the Federal Reserve will continue to aggressively raise the federal funds rate. There is a 50-50 chance the Fed will raise rates by 0.75% in July (rather than 0.50%), and some economists say there could be a 0.75% hike this week when the Fed meets, reported Scott Lanman and Kristin Aquino of Bloomberg.

The inflation news unsettled already volatile stock and bond markets. Major U.S. stock indices declined last week as investors reassessed the potential impact of higher interest rates and inflation on company earnings and share prices, reported Randall W. Forsyth of Barron’s. The Treasury yield curve flattened a bit as the yield on two-year Treasuries rose to a multi-year high, reported Jacob Sonenshine and Jack Denton of Barron’s. The benchmark 10-year Treasury Note finished the week yielding more than 3%.

There was a hint of good news in the report. The core CPI, which excludes food and energy prices because they are volatile and can distort pricing trends, is trending lower. It dropped from 6.5% in March to 6.2% in April and 6.0% in May.

The Federal Reserve’s favored inflation gauge is the Personal Consumption Price (PCE) Index, which will be released on June 30.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical periods.
Sources: Yahoo! Finance, MarketWatch, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
Data as of 6/10/221-WeekYTD1-Year3-Year5-Year10-Year
Standard & Poor’s 500 (Domestic Stocks)-5.1%-18.2%-8.0%10.6%9.9%11.5%
Dow Jones Global ex-U.S.-3.5%-16.1-19.31.81.23.6
10-year Treasury Note (Yield Only)3.2NA1.52.12.21.6
Gold (per ounce)-0.80.5-3.111.37.61.5
Bloomberg Commodity Index1.236.642.520.710.70.5

Coping with a bear market is not easy. A bear market occurs when stocks have declined in value by about 20% or more. Investing during a bear market can be a lot like playing baseball for a team that’s in a slump. Your teammates are worried, hecklers distract the players’ attention, and the team’s record of wins and losses moves in the wrong direction. You might find yourself beginning to question whether playing baseball is right for you.

Before you decide to exit the game, here are some tips for coping with bear markets:

1. Remember, downturns don’t last forever. The Standard & Poor’s 500 Index has experienced 7 bear markets over the last 50 years and recovered from all of them, reported Thomas Franck of CNBC. Here’s a rundown of the duration and returns of bear and bull markets since 1973.

YearBear MarketTotal ReturnBull MarketTotal Return
197321 months-48%74 months+126%
198020 months-27%60 months+229%
19873 months-34%31 months+65%
19903 months-20%113 months+417%
200031 months-49%60 months+102%
20077 months-57%131 months+401%
20201 month-27%TBDTBD

“Bull markets tend to last far longer and generate moves of far greater magnitude than bear markets. Time after time, bear markets have proven to be good buying opportunities for long-term investors,” explained Franck. Remember, past performance does not guarantee future results.

2. Stay diversified. Make sure your portfolio remains well diversified. During bear markets, some segments of the market will outperform while others underperform. A diversified portfolio can provide a cushion. Diversification won’t help you avoid a loss, but it can help minimize it.

3. Talk with us. During market downturns, investors often panic. That causes some to sell investments and incur losses that may be difficult to recover. If you’re tempted to sell, give us a call first. We’ll discuss your concerns, review your portfolio and help you decide on a course of action.

Possibly the most important thing you can do during a bear market is to stay calm.

Best regards,
John Klevens, CFP®

P.S. Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

Securities offered through Securities America, Inc., Member FINRA/SIPC. Financial Advice & Investment Advisory Services offered through PFG Advisors LLC, a Registered Investment Advisor (RIA). Klevens Capital Management, PFG Advisors LLC, and Securities America, Inc. are separate entities.
. Portions of this newsletter have been prepared by Peak Advisor
* These views are those of Carson Coaching, and not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.

Sources:

Carson Consulting
Lerner and Rowe