Weekly Market Commentary September 20, 2022

Fast Facts – What happened this week?

Some good news: The world had its lowest COVID death toll last week since March 2020, the World Health Organization said.

• The end of the pandemic “is in sight,” said WHO Director-General Tedros Adhanom Ghebreyesus.
• But “we are not there yet.”

Zoom out: Last summer’s Delta variant demolished the first sense of relief after vaccines.

• “If we don’t take this opportunity now, Tedros said while calling for more vaccinations and testing, “we run the risk of more variants, more deaths, more disruption and more uncertainty.”

The bottom line: The next surge could come by surprise.

Johns Hopkins University is scaling back its COVID metrics due to a slowdown in local data reporting, the university confirmed to Axios.

It must be true… I read it in the Tabloids:

A Nebraska man set a world record by paddling 38 miles down the Missouri River in a hollowed out giant pumpkin. Power-plant worker Duane Hansen, who grew the 846-pound gourd himself, completed the 11-hour voyage to mark his 60^th birthday, battling cold, heavy rain, rocks, and aching knees along the way. “I probably won’t try this again,” he said afterward. “If somebody breaks this record, I will bow down to them because they are tough.”

A Wendy’s employee in Pennsylvania was arrested for sabotaging railroad equipment in a bid to disrupt traffic and ensure a quiet work shift. The 34-year-old was identified by co-workers after security cameras captured him, dressed in his Wendy’s uniform, installing a device designed to activate a crossing gate. He and an accomplice hoped “that would prevent people from getting to Wendy’s, and they could have a slow night at work,” said an officer with the Tilden Township police. The man was charged with criminal mischief and reckless endangerment.

Weekly Focus – Think About It

“There’s nothing wrong with enjoying looking at the surface of the ocean itself, except that when you finally see what goes on underwater, you realize that you’ve been missing the whole point of the ocean. Staying on the surface all the time is like going to the circus and staring at the outside of the tent.”
—Dave Barry, humorist

The Markets

It’s open to interpretation.

Jackson Pollock was an action painter. He poured, dropped, and dripped paint onto horizontal canvases. Some people look at his work and wonder why it’s highly valued. Others find deep meaning in the paintings. For instance, Pollock’s Convergence is a collage of splattered colors that has been described as “the embodiment of free speech and freedom of expression…It was everything that America stood for all wrapped up in a messy, but deep package.”

Today, gauging the state of the American economy is akin to interpreting abstract art. Many economic indicators suggest the economy remains strong despite the Federal Reserve’s efforts to cool it off. For example:

• Inflation is sticky. Last week’s inflation report wasn’t everything Americans hoped it would be. Overall, prices moved 8.3% higher over the 12-month period that ended in August. Core inflation, which does not include food and energy, moved higher from July to August. Taming inflation is the Federal Reserve (Fed)’s job.
• Rates have been moving higher. As it works to tame inflation, the Fed is raising the federal funds rate at a rapid pace. Some are concerned that the Fed will make a policy mistake and raise rates too much, causing a recession. In August, Fed Chair Jerome Powell warned some pain may be ahead for the U.S. economy
• The labor market remained vibrant. Despite the Fed’s efforts, U.S. employers added jobs last month and more Americans returned to the workforce. At the end of August, the unemployment rate was slightly higher at 3.7%, reported Megan Cassella of Barron’s, which could mean Fed tightening is beginning to have an effect.
• The manufacturing sector continued to grow, and so did the services sector. The Institute for Supply Management reported the Manufacturing Purchasing Manager’s Index (PMI)^® and the Services PMI^® showed the economy expanded for the 27th consecutive month. Readings above 50 indicate economic growth. New orders were up in August, and prices were down.
• Consumers were more optimistic. As gasoline prices dropped, the University of Michigan’s Consumer Sentiment Index showed that consumer sentiment rose to a five-month high last week. That’s not as positive as it may seem. Sentiment levels were comparable to those during the Great Recession, reported Alicia Wallace of CNN.

While economic data are open to interpretation, one thing is for sure: many investors are not happy. Retail investors remained strongly bearish last week, according to the AAII Sentiment Survey, and institutional investors had little appetite for risk. Some investors are making losses permanent by moving from equities to cash. Some are holding investments as they wait for the turmoil to end, and others are waiting patiently for opportunities to arise in the midst of market volatility.

Major U.S. stock indices moved lower last week, and U.S. Treasury yields moved higher across the yield curve.

Making Waves. Ocean waves pack a lot of power. According to the Office of Energy Efficiency and Renewable Energy, a single wave could power an electric car for hundreds of miles. And yet, when people talk about renewable energy, you don’t hear much about wave power.

Americans have been working to harness the energy of waves since the late 1800s. Christine Miller of the Western Neighborhoods Project described the excitement around wave energy in California at the turn of the 20^th century.

“In December of 1881 the San Francisco News Letter ran a small article about the tremendous potential of the wave motor developed by a Californian named John W. Swailes. His invention was to be used for ‘public and private baths in this city, watering streets, flushing sewers, generating compressed air for driving machinery, also electric energy for illuminating the streets, etc. together with the last and most important purpose of extinguishing fires…’

“For two decades [1890-1910] wave motors of various designs were experimented with along Southern California’s beaches…Most notable was the Starr Wave Motor of Redondo Beach which began construction in 1907. It was a large project that hoped to supply power for six counties. In the end, the enormous machine collapsed in 1909 because of the flimsy construction of the pier on which it was attached.”

Today, waves have the potential to provide about 64% of total U.S. electricity generation, according to the U.S. Energy Information Administration (EIA), if we can figure out how to efficiently harvest wave power. A variety of methods and technologies are being developed and tested.

Best regards,
John Klevens, CFP®

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. Portions of this newsletter have been prepared by Peak Advisor
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* Consult your financial professional before making any investment decision.

Sources:
Carson Consulting
Johns Hopkins to reduce COVID data tracking (axios.com)
Fast Facts. “Controversy of the week”. The Week Magazine, 23 September 2022, Volume 22, Issue 1097, pp 6