BLOG

During a recent interview, growth stock investor Cathie Wood remarked that “innovation solves problems”.  That is one of the beauties of investing, entire industries seemingly come out of thin air when the times get tough.  Most recently, the pandemic brought us Zoom Video which is now a $22 billion dollar household name.  Think of Moderna, another pandemic problem solver. And as we come out of an unprecedented economic shutdown that inadvertently is causing a major shortage of workers, witness the lowest unemployment since 1969, Amazon is adding about 1000 robotic “workers” per day.  “That means Amazon could have more robots than employees by the year 2030” continued Wood.  Innovation and savings are the keys to economic growth and it’s hard to bet against the ingenuity that is here at home and around the world.

It has been a good month for Philadelphia…Not only are the Eagles vying to be in the NFSC championship game but the Philadelphia Exchange indices are leading the way in the market.  Look at the PHLX Gold/Silver index up 12% year to date, PHLX Semiconductor index up 10%, and the PHLX KBW Bank index up 6%.   A late day rally on Friday has helped give stocks a nice run to start the year and three positive weeks for the Nasdaq.  To quote two of our most famous traders from the Philly exchange (by way of the movie, Trading Places) Louis Winthorpe III “Looking good, Billy Ray.”  Billy Ray Valentine “Feeling good, Louis.”

With stocks and fixed income both in the red this year, we continue to remind people that “there is always a bull market somewhere”, making the case for a diversified portfolio. 2022 to date has certainly tested the resolve of investors, the classic 60-40 stocks to bonds allocation model is suffering its worst performance since the Great Depression, currently down about 18%. We have had some re-assuring good news in several stocks that many of our clients own (full disclosure). For example, a huge spike in energy costs has lifted Chevron up 56% year to date. In the arena of health and biotech, Regeneron just recently had the first FDA approval for an eczema treatment (Dupixent) for adults. The stock is up 17% this year. With the attention and funding going into infrastructure projects, combined with high crop prices, John Deere has managed a 15% increase this year. Finally, as the Fed combats inflation with higher interest rates, regional bank NBT is up close to 24%. The point is that stocks move with the market in both bull and bear markets, but having a diversified portfolio with investments that don’t always correlate with these moves can help mitigate the risks.

It is October and we have entered the Clown House of volatility with intra-day swings of 5%+, so buckle up for the ride.  For markets, the Fed’s reaction to inflation is the key, as higher interest rates are kryptonite to stock values.  Unfortunately, politicians do not seem to understand the basics.  If you throw literally trillions of dollars into the economy at the same time there are supply issues, you will by definition get inflation.  The Fed will then raise rates to slow the spending and cool off the economy.  Hard stop.  If the government continues to print money, the Fed cannot raise rates high enough and fast enough.  Politicians need to stop handing out money to voters.  A recent Barron’s article. “States’ Stimulus Spending is a Negative for the Fed”, points this out, that states are prepared to spend $31 billion in stimulus programs.  For example, Kirsten Gillibrand is doing the Thruway tour touting the $1 billion dollars of funding for higher heat costs this year.  Feel good moment, yes, helping combat inflation…just the opposite.  Social security going up 8.7%, a nice boost for seniors and a nice boost for inflation.  Forgiving student debt, does not forgive higher inflation.  The bottom line, inflation-relief measures tend to increase inflation which crushes the working class.  Beware the Clown bearing gifts.