In my last publication, I discussed a weakening economy and a resulting higher rate of disinflation – we had made significant progress in cooling off inflation. In this piece, I will continue to highlight this progress, however such progress does come at a cost. The most recent CPI print for June came at a decline of 0.1% from May, putting the 12-month rate at 3%, around the lowest in more than three years. Excluding food and energy costs (often volatile costs), the Core CPI increased 0.1% monthly, which is a 3.3% increase from one year ago. This was the smallest annual increase since April of 2021.

Earlier this year, I published an article titled “Bank Failures, Bond Rallies, Inflation Softening”. In that piece, I covered failures in a handful of banks mostly due to irresponsible management of their bond portfolios and a weak venture capital backdrop (many customers of the bank were VC). The result was essentially a bank run as these customers needed capital, and a panic ensued from lack of such capital that the bank could make available while they sold heavily discounted bonds off their balance sheets to return capital to depositors. Not exactly a recipe for success or risk management.

Last June, I published an update piece to the publication titled “The Reality of Where We Are”. In those pieces was a very cautionary and bearish tone, one that identified a flattening (now inverted) yield curve (when short maturity interest rates are higher than longer maturity rates – almost always a tell-tale sign of recession) and a Federal Reserve that had a lot of catching up to do from way too loose of policy.

In March of this year, I published a cautionary piece for investors and consumers. It can be found on our website by visiting this link: https://lauderdaleadvisors.com/the-reality-of-where-we-are/. My concern was a Federal Reserve that was way behind, analysts and economists were way too bullish, and a consumer that was outspending its means, even in a strong economy. I had taken a very defensive posture for clients, our quants were some or all cash, short term Treasurys, or cash equivalents, and our hedge strategies had really begun to see their underlying protections grow in value. We’ve seen bonds continue to plummet as rates rise, a yield curve inversion (and another one today), and a Fed that has finally decided that it was wrong all along.

When I first began developing these pieces, the purpose behind developing a vision for them was to deliver a concise, no-nonsense article for clients and followers to receive my perspective without the typical fluff that we see time and again in other publications. I named this concept Keeping it “Reel” as I liked the fishing pun, but also the meaning behind it. Today I intend to communicate where my thoughts are at with the environment that we have found ourselves in.

I’ve said time and again that one of the biggest near- and long-term risks to an expensive growth sector is interest rates. When the candy is taken from the baby, we should expect to hear some crying. Over the last couple weeks, growth stocks (mostly tech) have been weeping, and we see it as a proper reaction to the swift rise in longer interest rates (10+ year Treasurys). With the irrational exuberance in the markets most obviously depicted by novice traders taking advice from Reddit posters, numerous SPAC (special purpose acquisition company) IPOs, extreme equity valuations, we felt the time was right for things to take a breather. Unbeknownst to many new retail traders driving this sentiment, trees do not grow to the sky.

It’s quite remarkable how retail investor (at-home traders and investors) behavior helps professionals get a gauge on the market’s sentiment and health. I’ve been reading all across social media platforms about what stocks people have been trading, many of whom just got started ‘day trading’. I’ve even seen threads on sports boards for my beloved Florida State Seminoles about what stocks are the flavor of the week and how much money is being made. Self-proclaimed experts seem to be rising by the masses. As this type of activity runs rampant through the markets, it screams a signal to us to prepare for some volatility that the market is due for.

Last week, biopharmaceutical companies Pfizer and BioNTech announced that their mRNA-based vaccine candidate has demonstrated evidence of efficacy against COVID-19 in participants without prior evidence of infection. The vaccine candidate was found to be more than 90 percent effective in preventing COVID-19 in participants in the first interim efficacy analysis. The study enrolled 43,538 participants, with 42 percent having diverse backgrounds, and no serious safety concerns have been observed. Submission for Emergency Use Authorization to the FDA is expected to occur in the third week of November.

It’s hard to believe that just four years ago, we were having strikingly similar conversations about the election and its potential effects on markets and retirement plans. Comparable to 2016, the conversation remains the same—do not allow political uncertainties to run your investments. Historically, markets have managed appropriately over the long term, no matter the political party in office. We must not allow outside influences and emotions to cloud our investment discipline.

You’ve seen it all over the headlines and social media. It’s been the chief subject among your friends and peers. Coronavirus. Beyond panicked shoppers, closed restaurants, and cancelled public events, what are the proper expectations for your money? Those who have been reading my Keeping it “Reel” pieces know that I publish these during times of uncertainty, times when clients should be hearing from their advisors. It hasn’t been often lately, but it is necessary now. While we live in a society that is jam packed with content for us to feast on, my intention is that folks read a condensed version of what I feel like is a rational take on things.

You’ve likely been seeing and reading all the hype about the famous yield curve inversion. I found this to be an ideal time for my first Keeping it “Reel” post, so I’m writing this piece today to provide some clarity as well as my opinion on this topic. I had delayed the release of this because of Hurricane Dorian.  

Thank you for taking the time to read my first blog post. I would like to introduce to you a concept that I dreamed up called Keeping it “Reel.” Most of you know my passion for fishing and conservation of our marine resources so I wanted to have a little fun with the theme.