DIASTOLE ECONOMIC AND MARKET COMMENT
November 18, 2024

After the election-week rally in stocks (two weeks ago), it is not a surprise that equity markets slipped downward over the past week as investors took profits. Still, year-to-date gains are impressive, with the Nasdaq Composite Index up more than 25%, and the Standard & Poor’s Composite Index up 24.6%. Year-over-year, stocks are doing even better, with the Nasdaq up more than 34%. As we close in on the end of this year, the year-to-date numbers will merge with the trailing-12-month numbers, until on December 31st, the year-to-date return is exactly the same as the 1-year number. And then we start over in 2025.

In addition to profit-taking, last week saw investors react to the midweek October consumer-price index (CPI) which rose by 2.6% over the trailing-12 month period. That was in line with expectations, but was it so high above the Federal Reserve’s target of 2% that a December rate cut is now in jeopardy? The Fed’s Open Market Committee (FOMC) has the unenviable task of trying to determine what the next Trump Administration’s policies will mean for interest rates before the inauguration even takes place. I believe that Fed Chair Powell will telegraph the FOMC’s actions before they are announced on December 18th, and I would not be surprised if the Fed takes one month off from rate cuts and reevaluates the situation at its next meeting at the end of January. Stay tuned.

On Friday, a solid retail sales report pushed stocks lower again, as fears continued that the Fed might not need to lower rates in the face of this strong economy. Good news was bad news!

We are seeing bond yields rise as prices fall (yields and prices move in opposite directions). Some of this is due to concern that Trump will not only renew the tax cuts he implemented in 2017, but will initiate some new tax cuts. That will cost the government money it doesn’t have, which necessitates borrowing, which means the government will have to sell more Treasury notes and bonds. In order to attract more bond buyers, yields will have to rise. As yields rise, the government pays more and more to bond holders. Necessitating more borrowing. Causing inflation. You see the problem.

And speaking of inflation, in most U.S. cities it now requires a six-figure income to afford a house. In 2019, it required “only” $56.800 in salary to buy a house along with the property taxes and insurance costs that come along with homeownership. According to a report from Oxford Economics, as reported by CNN, just 36% of households earned enough to buy a home in the third quarter of 2024. In 2019, pre-pandemic, that figure was 59%.

And STILL speaking of inflation, bitcoin (and other cryptocurrencies) have risen to record highs since the election. This is largely due to President-Elect Trump’s publicly endorsing crypto, but interestingly also due to the increased crypto holdings of people who are considered “underbanked”. The underbanked are those individuals and families who do have access to bank accounts, but also rely on check-cashing establishments, pawn shops and buy-now-pay-later services. These households are buying cryptocurrencies at a higher level than wealthier households, which allows them to store assets in digital wallets, but also exposes them to crypto-hacking and the market vicissitudes of crypto prices. Risky at best. But with bitcoin now at nearly $90,000, the risk has paid off - for now.

If you feel like you can’t turn on the television without seeing green witches and hearing “Defying Gravity”, then you are in Wicked world. The movie won’t be released until Friday, but we are in full-on merchandising mode. So full-on, in fact, that Mattel rushed Wicked dolls to market and printed the web address on the box as wicked.com instead of wickedmovie.com. Sadly, wicked.com is a porn site. Oops. Dolls still on the shelves are being retrofitted with stickers printed with the correct address. Parents who have already bought the dolls are being advised to discard the packaging or obscure the web address. Or just hope for the best? It’s not like kids are curious.

For the week ending on November 15th, the S&P 500 finished at 5,870, the Nasdaq at 18,680, and the Dow Jones Industrial Average at 43,444. The yield on the ten-year Treasury Note closed at 4.428%. U.S. crude oil cost $67.51 per barrel, N.Y. gold cost $2,597.73 per ounce, and one Euro was worth $1.06.

Elizabeth E. Cook
Partner, Diastole Wealth Management

News and information presented here was gathered from sources believed, but not guaranteed, to be reliable, including (but not limited to) Yahoo Finance, The Wall Street Journal, Bloomberg, Barron’s, Reuters, Business Insider, Axios, The New York Times, The Bureau of Labor Statistics, CNN, USA Today, CNBC, The Hustle, and The Washington Post. If you have questions, please call us at 203.458.5220.

Have a spare $12,000? You can risk permanent loss of vision and get corneal tattooing in order to change your eye color! Yay! Using a surgical procedure that is normally employed for eye diseases and injuries, corneal tattooing (also called keratopigmentation) uses lasers to cut tunnels into your corneas, and then fills them with dye. It takes about a half hour and the results are permanent. So don’t pick red. Please.

DIASTOLE ECONOMIC AND MARKET COMMENT
November 25, 2024

December first is Sunday. This coming Sunday. Time to panic! Or not. Maybe after Thanksgiving?

The Dow Jones Industrials gained 2% last week, while the S&P 500 and the Nasdaq Composite Index both added more than 1.5%. There are a lot of factors fueling the stock-price hikes, one of the primary ones being that investors are now expecting inflation to rise if the Trump-proposed tariffs are enacted. So they’re selling bonds, causing prices to fall and yields to rise, in anticipation of further losses in the bond market. That frees up funds to go into stocks, and that’s just where they went.

The Federal Reserve meets again in three weeks to consider another rate cut. Will facts on the ground support such a move? We will know more after Wednesday’s PCE (personal consumption expenditures price index) reading. But we’ve already seen the October jobs report, which was generally considered weak. 29 states reported negative payrolls growth, according to ING economist James Knightley. That was more states than experienced a major strike or a hurricane. And it compares to 14 states reporting negative payrolls growth in September. A weak jobs report will incline the Fed to cut rates again, but we also have the November jobs report which will be out on Friday, December 6th and will figure into the Fed’s decision making.

Depending on which measure you prefer, overall inflation is somewhere between 2.3% and 2.6%, annualized. The Fed’s target rate is 2%. But it has the dual mandate of keeping inflation low AND keeping employment full, so the rate decision could still go either way. As usual, I expect that the Fed will quietly leak its decision in advance so that no one will be surprised. Fed Chairman Jerome Powell hates surprises.

It’s not just bond yields that are slowly and steadily climbing. Mortgage rates are too. Today, an average 30-year mortgage charges 6.98%. Not exactly the refinance level that so many recent homebuyers were hoping for - and another reason why the stagnation in the home market continues. Homeowners with attractive 2-3% mortgages are unlikely to move, with rates where they are now, contributing to a shortage of inventory and elevated prices for real estate. It’s very unusual for mortgage rates and house prices to climb at the same time. They usually move in opposite directions. But nothing is usual about this housing market.

According to the Washington Post and the Wall Street Journal, American businesses are stockpiling inventory in advance of the potential Trump tariffs. Tariffs could make Chinese goods unaffordable, and goods from other countries more expensive. American businesses are widely expected to pass on tariff increases to their customers. On the other hand, President-Elect Trump’s selection of Scott Bessent to head the Treasury Department is being welcomed by business leaders, as Bessent is seen as a moderating influence on the tariff question.

As we watch the Fed to see where they will move, we can be very grateful that we don’t live in countries that are beset with REAL inflation. Places like Argentina, which faces 193%, year-over-year, or Russia, whose government just raised rates to 21%. Yes, our inflation was very bad two years ago, and sadly, inflation over the last few years is cumulative, but it could be worse.

The world chess championship is about to get started on an island off the coast of Singapore. One problem? The world’s greatest player, Magnus Carlsen, won’t be there. Instead, he is going to face the second-best player in the world, Fabiano Caruana in a championship to name the number one player in Fischer Random chess. Fischer Random, named for American Bobby Fischer, is a game in which the pieces on the back row of each player’s board are placed randomly, making each game unique. There are 960 possible starting positions. Magnus Carlsen has created a new chess league, Freestyle Chess, and has already raised millions in venture capital and signed 25 of the world’s best chess players to join the tour. “People find it fascinating,” Carson said, “that top players are almost as clueless as they are at home.”

For the week ending on November 22nd, the S&P 500 finished at 5,969, the Dow at 44,296, and the Nasdaq at 19,003. The yield on the ten-year Treasury Note closed at 4.41%. U.S. crude oil cost $70.75 per barrel, N.Y. gold cost $2,698.70 per ounce, and one Euro was worth $1.05.

Elizabeth E. Cook
Partner, Diastole Wealth Management

News and information presented here was gathered from sources believed, but not guaranteed, to be reliable, including (but not limited to) The Wall Street Journal, Morning Brew, Yahoo Finance, The New York Times, The Washington Post, USA Today, Bloomberg, CNBC, Barron’s, CNN, Artnet, The Economist, Market Watch, Reuters, and The Associated Press. If you have questions, please call us at 203.458.5220.

Perhaps you’ve heard about the banana that just sold to an art collector for $6.2 million. The banana is taped to a wall with duct tape, and originally sold in 2019 for $120,000. Of course, it’s not THAT banana, and not THAT duct tape - naturally due to aging and wear the two components of the art piece must be frequently replaced. Plus, the buyer, cryptocurrency entrepreneur Justin Sun, has announced that he will eat the banana. But since the artwork is really an idea and not a physical reality (beyond the ephemeral), and can be recreated by the buyer whenever he wants, it appears that Mr. Sun will be able to have his banana and eat it too.

DIASTOLE ECONOMIC AND MARKET COMMENT
December 2, 2024

Thanksgiving was fun, wasn't it? A day off work or two. Turkey and pie. Wish we could do it every Thursday. (Kidding.)

So now you get to relax and think about your New Year’s Resolutions, and snuggle into the coming winter with nothing else on your… oops. Enjoy the holidays best you can, and if you happen to make extra cookies this year, remember the hungry mouths at Diastole!

Last week had only three and a half trading days and was the end of November trading, but the Dow Jones Industrials and the S&P 500 both managed to perform their best since the PRIOR November in 2023. The Dow was up 7.5% in for the month, the S&P was up 5.7%. The Nasdaq didn’t beat last November, but did manage to close up 6.2% for the month. Not bad.

Obviously stocks are still reacting to the Trump presidential win, which investors see as anti-regulation (except tariffs) and pro tax-cut. Those who are worried that tariffs may cause prices to rise aresome tariffs on Mexico, and Canada, and 100% tariffs on the BRICS countries, which include Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates. He is hoping to discourage BRICS countries from attempting to wean their trading practices away from the U.S. dollar.

Last Wednesday, the personal-consumption-expenditures price index (PCE) was released for November at 2.3% year-over-year. That was what was expected, and was widely seen as encouraging the Federal Reserve to cut rates this month. But the Consumer Price Index (PCI) came in higher, at 2.58% year-over-year. Will that be enough to stop the Fed from lowering rates in two weeks? The Fed’s target inflation rate is 2.0%.

A brief look at real estate. Sales of previously-owned homes are on track for their worst year since 1995. Yikes! We’ve often talked about mortgage rates steadily rising while home prices also rise. It isn’t what we normally expect from yields and prices, which are SUPPOSED to move in opposite directions, but we’re not in Kansas any more.

A Macy’s accountant who was responsible for small-package shipping expenses , managed to “intentionally” hide somewhere near $145 million in delivery expenses over the past few years. He didn’t take any of the money himself (or herself), but hid it on the balance sheet so carefully that external audits didn’t find it for three years. Was he planning on taking possession, or just having fun? Reports are that he no longer works for Macy’s, but say nothing about criminal fraud.

For the week ending on Friday, November 29th, the S&P 500 finished at 6,032, the Dow at 44,910, and the Nasdaq at 19,218. All three hit record highs last Tuesday. The ten-year Treasury Note closed at 4.178%. U.S. crude oil cost $68.18 per barrel, N.Y. gold cost $2,649.87 per ounce, and one Euro was worth $1.05. Bitcoin continues to flirt with the $100,000 level, but hasn’t quite made it, and closed Friday at $97,786.78.

Elizabeth E. Cook
Partner, Diastole Wealth Management

News and information presented here was gathered from sources believed, but not guaranteed, to be reliable, including (but not limited to) The Wall Street Journal, The Washington Post, The New York Times, Barron’s, MarketWatch, The Economist, Bloomberg, Business Insider, Axios, Market Brew, Yahoo Finance, Market Brief, CNBC, CNN, Reuters, and the Associated Press. If you have questions, please call us at 203.458.5220.

Last week we discussed art collector Justin Sun’s intentions to eat the Maurizio Cattelan banana taped to a wall that he just purchased for $6.2 million. After doing just that he said, it was “much better than other bananas.” I cannot top that.

DIASTOLE ECONOMIC AND MARKET COMMENT
December 9, 2024

Please forgive the brief, bullet-pointed format today. I’m a little under the weather and my brain doesn’t seem to be up to paragraph-formation.

- We got the November jobs report last week on Friday. It showed that 227,000 net new jobs were created in the month. Also, the October jobs report, which was quite disappointing, was revised slightly higher.
- Federal Reserve watchers believe that these reports are good, but not so good that the Fed will fail to cut rates when it meets next week. We should know for sure right before the Open Market Committee makes its announcement on Wednesday the 18th - because they like to leak!
-The November consumer price index (CPI) will be released this Wednesday - the last bit of data before the FOMC makes its decision.
-Markets closed Friday at record-highs for the Standard & Poor’s 500 and Nasdaq Composite Index, and nicely high for the Dow Jones Industrial Average.
- Bitcoin finally closed above $100,000 - mostly on news that President-Elect Trump will appoint a crypto-sympathizer to lead the SEC, and will create a position for an AI & Crypto Czar.
- According to Adobe Analytics, last week’s Cyber Monday was the biggest American online shopping day on record. Sales topped last year by 7.3% for a total of $13.3 BILLION.
- South Korean President Yoon (coming off his martial-law debacle) and French President Macron (whose Prime Minister just stepped down) are both facing increasing calls to resign. But their situations can’t compare to Bashir al-Assad of Syria, who just fled to Russia as a rebel army took control of Aleppo and Damascus. A spokesman for Putin has said he will not meet with Assad. Ouch. I guess that corner apartment is now out of the question.

Elizabeth E. Cook
Partner, Diastole Wealth Management

News and information presented here were gathered from sources believed, but not guaranteed, to be reliable, including (but not limited to) The Wall Street Journal, The New York Times, The Washington Post, Barron’s, MarketWatch, The Economist, Bloomberg, Axios, Morning Brew, Yahoo Finance, CNBC, CNN, Reuters, and The Associated Press. If you have questions, please call us at 203.458.5220, or reply to this email to reach me, Liz Cook.

- Baseball player Juan Soto has left the Yankees and joined the Mets for a $756 million dollar/15-year deal. That’s $50.4 million per year or $138,082.19 per day. Same as I get!