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Dad Cents S4 E22: May Market Madness: Conquering the Financial Landscape and AI Stock Explosion

Dad Cents S4 E22: May Market Madness: Conquering the Financial Landscape and AI Stock Explosion

June 06, 2023

Jason Fuchs (Host) 0:00

Ladies and gentlemen, welcome to Dad's Sense. I'm your host, jason Fuchs, managing director of SagePath Financial Advisors. This is the monthly update where we discuss what happened in the markets, what happened in the economy last month, in May. Amber will be back next week. I promise you that, and I am thrilled. I am so pumped to have her back on this show. Let's get into it. Ladies and gentlemen, shall we? April showers traditionally bring May flowers? Instead, we saw it bring market volatility in May. Ladies and gentlemen, can you believe May is done and we're already in June? We're just about halfway through 2023. Unbelievable. 

There were mounting concerns about the looming debt ceiling deadline. Anyone tired of hearing about that? I know I am. Those concerns had investors worried about the potential fallout, and that cast a dark cloud over financial markets for the month of May, even after the White House and GOP struck a deal to hopefully knock on wood right, avoid that default. There were concerns, and those concerns persisted, about whether Congress would pass the bill.

Earlier in the month, amid concerns about the banking sector and tightening credit conditions, the Fed elected to increase interest rates by 0.25%, so one quarter of a point. Citing elevated inflation and robust job gains, they indicated that, while they might pause future rate hikes, the decision would be based on prevailing economic conditions, particularly since that 4.9% annual inflation rate far exceeds the Fed's 2.0% goal. There are several Fed members that support future rate hikes, and they suggested that inflation was declining too slowly. While the Fed might see the decline as quote unquote too slow, inflation at least continued its downward trend in May. The year-over-year price increase of 4.9% was the lowest since April 2021. This is a bit of good news. It means that as the inflation rate continues to decline, there will be less pressure on the economy and household budgets. However, it might take several months for the consumers to start seeing those effects. There's always a little bit of delay.

Mid-month, there were signs that the housing market may be staging a comeback, a turnaround, after a long period of contraction. There's something out there called the National Association of Homebuilders Housing Market Index. An increase in homebuilder sentiment put that index's confidence level at the midpoint for the first time since July 2022. New single-family home sales increased in April, climbing 4.1%. That optimism, though, was tempered. There was a decrease of 3.4% in the sale of existing homes. Moving on technology artificial intelligence those stocks which have led the market this year were actually under pressure. Traders began to anticipate the possibility of future rate hikes and one particularly well-known chip maker saw, at stock surge, 36% in May. Incredible, ladies and gentlemen.

In other nudes, the WGA anyone familiar with these folks, the WGA labor union went on strike. It's the largest interruption to American television film production since the COVID-19 pandemic and it's the most significant labor stoppage for the WGA since 2007 and 2008, when they went on strike. As a result, multiple films, shows, podcasts have been delayed or shut down completely. This means well, it looks like it might be a long summer of reruns or sitting around trying to figure out what to watch in the evenings. Anyone have that problem in the evenings? The hunt, if you will. No delays on our end with Dad Sense. The scheduled changes that you've seen lately were a result of my travels, but I'm not traveling for some time, so we'll continue to bring you new episodes of Dad Sense every week on Tuesdays, and again, amber's coming back. I'm thrilled.

month, we continued to see the impacts of severe weather events. Many lives worldwide were lost to floods, earthquakes, wildfires, hurricanes, tornadoes, all kinds of stuff. Our thoughts, our prayers go out to anyone impacted and, if you're listening, ladies and gentlemen, we're here for you and just know that we care, reach out. If there's anything that we can do to help Consumers, well, they'll likely continue to see their insurance premium increases resulting from the upswing and property losses ongoing high costs for all of those construction materials everyone seems to be getting their hands on. In fact, it was reported in May that state farm insurance will no longer accept new insurance applications for homes, businesses in California citing wildfire risks. And we've seen that here in Florida too Velocity, the Fuchs family's former homeowner's insurance company. Well, they dropped us last year, not because we did anything wrong, but they're no longer doing business in the state of Florida. Like I said, i've seen that a lot lately and, as a result, the insurance premium we pay annually it doubled. Ladies and gentlemen, are you feeling the insurance pain too? It's wild. Anyway, let me get off my soapbox. I'm sorry. I couldn't resist A quick reminder for anyone who is a college student, anyone who knows a college student the FAFSA, that free application for federal student aid. 

The deadline to submit the application is June 30th, 11.59 pm, central Time. They're very specific about that. To qualify for federal financial aid, student loans, students must submit that FAFSA application each year. That's right. If you want student aid and if you want loans, you have to complete the FAFSA, and missing that deadline means you might not be eligible for federal financial aids. So don't be like the US government and the debt ceiling. Ladies and gentlemen, do not wait till the last minute on that. Again, i could not resist. There is more to come.

I want to get into stocks, bonds, and summarize what's going on in the economy. But, ladies and gentlemen, i want to take a second and say we're grateful to be part of your financial coaching team. If there is anything you need, please schedule some time with our office. Again, i've got more information for you, but our contact number is 904-366-9388. The email is info at SagePathFAcom. You can even head to our website, wwwsagepathfacom. There's a calendar in the upper right-hand corner. Click it. You can schedule some time on a day that's convenient for you. No worries, i'd like to wrap up with a summary of stock and bond performance and a brief economic update. What do you think, ladies and gentlemen? All right, you're so supportive. Let's cover stocks first. We're almost done, i promise Markets Well, they offered quite a mixed bag in May.

There was a wide berth separating the strongest from the weakest performing indices. The S&P 500 index continued to grind higher by a positive 0.43%, facing numerous economic and political headwinds. It was actually propped up by a stronger than expected tail end of earnings season. The NASDAQ 100, comprised mainly of growth-oriented tech stocks, posted a robust positive 7.73% return. That was driven by a narrow band of companies NVIDIA, alphabet, amazon, just to name a few Value-oriented blue chip stocks. They retreated. The Dow Jones declined about 3.17%, snapping a two-month winning streak.

Ladies and gentlemen, this is why we don't invest in major indices. There's just too much volatility, especially right now. A more balanced, focused portfolio is more advantageous, in my opinion. If you'd like to know more, please reach out. We'd be happy to help. Matter of fact, i think it was our last episode actually discusses why asset allocation is so important. So if you haven't listened to that episode, give it a try. I think you might like it.

All right, let's talk about sector performance. In the US, sector performance growth, particularly those stocks higher up on the cap spectrum. So your large caps well, those perform the best. Value small cap fared poorly. Of the 11 sectors, three finished the month. Higher Information technology was the best performer, closing the month up nearly positive 9.41% Energy stock.

Do you remember what happened to energy stocks in 2022? Yeah, it was actually the best performing sector. Well, they were the biggest laggard in May, returning negative 10.03%. Unease over the approaching debt ceiling Pushed Brent and WTI prices down. People were fearing that there would be a default and that would produce an economic crisis there by curtailing demand. And again, ladies and gentlemen, this is why we create a balanced, more focused portfolio for our clients. Who could have predicted that IT would be the best performer? And what about energy?

Moving on to bonds, well, the Fed. I talked about this earlier. They met earlier in the month of May and unanimously decided to raise that target range of the federal funds rate to 5 to 5.25%, and at the time, they signaled being closer to the end of their rate hiking campaign than the beginning. In the latter half of the month, the debt ceiling talks. The increased expectations for another interest rate hike saw US Treasury yields rise significantly. Unsurprisingly, the bond complex was broadly negative, with US aggregate bond index down negative 1.09%, the US corporate bond index down negative 1.45% and Treasuries down negative 1.14%. It's tough to find safety right now.

We're going to conclude today's episode with a brief economic update. That old stock market adage sell in May and go away? Well, hasn't quite come to fruition. Another month of positive performance was tacked on to 2023. Thank you, may, the saying.

Well, it's attributable to the stock trader's omnac and it refers to the best 6 months of the year. Historically, the top performing 6 month rolling period, on average, has been November through April. Ah, november, what a fantastic month. Thanksgiving, amber's birthday, jules' birthday which is actually the same as my birthday, jules and I share that day My brother's birthday, my sister's birthday, my sister-in-law's birthday, all kinds of birthdays. November, what a fun month. Fall that's my favorite time of year. Anyway, what's interesting about this year is the breadth or the lack thereof, that's been driving performance. There have only been a handful of stocks driving 2023's gains Nvidia, apple, alphabet, meta, tesla, healthy balance sheets and a plethora of cash. In a period of high inflation and broad market uncertainty, they've created safe haven of sorts for those names driving interest from investors.

Now I want to end on a positive note with this month's thought, something new. There's a great quote by a wonderful woman If you look at what you have in life, you'll always have more. If you look at what you don't have in life, well, you'll never have enough Wise words from a lovely woman, oprah Winfrey. Amber, if you're out there listening, i know you'll appreciate that one. All right, let's wrap this up. Ladies and gentlemen, thank you so much for sticking around for the market update for the month of May. We'll see you next week, next Tuesday, for new episodes of Dad Sense. Amber will be on with us and I am thrilled. Thanks for listening. Make it a wonderful day. Oh, oh, oh.

Santa 13:28

I'm a big fan of the love of the world. That's me. Santa Clause, otherwise known as Old Saints Sage Jason, has me on payroll so his three-year-old daughter can get all the hot toys ahead of schedule. I'm visiting from the North Pole so I can read the disclosure. We don't want to irritate regulators now. Securities and Investment Advisory Services offered through FSC Securities Corporation, fsc member, finra, sipc FSC is separately owned in other entities that are marketing names, products or services referenced to. our independent of FSC Jason Fuchs, Amber Fuchs and Sage Path financial advisors are on affiliate. Oh, oh, oh.