There is a very old, well known, Wall Street saying that goes something like this.
“The stock market will always climb a Wall of Worry!”
Oddly there are two themes that are conveyed in this saying.
- The obvious, a wall of worry creates enough doubt for capital markets to operate efficiently and rise
- The less obvious, when everything is clear and the sun is shining, sometimes it’s near the end of the expansionary times and happy capital markets.
As fast as this year went, our memories are still very clear on what capital markets look like just twelve months ago.
In chicken little like fashion the sky was falling, Capital Markets, and participants were throwing a giant hissy fit, and the federal reserve was cranking up interest rates to participants dismay.
With 2020 hindsight, a nice wall of worry was created.
With earnings being the ultimate driver of capital markets, a drop in earnings, a recession, or global slow down, would lead to the decline in capital markets but for now we certainly don’t have to worry about item two above in that old wall street saying.
Speaking of recessions, be sure to review the capital market article in our Q1 2020 Newsletter, concerning the lowering of rates while the inverted yield curve – a much talked about by us event, and somewhat disdained. As mentioned in the newsletter we ran across this information mid quarter, and certainly must acknowledge the history brought up by the speaker and his chart, which may avert a recession, at least for now
Also in the newsletter two, two -part personal financial planning articles, one dealing with inheritance and another dealing with automobiles that you may find interesting as these topics were repeated in our office throughout the final quarter of the year and made for a great subject.
Thank you for your time, thanks for reading our blog posts, newsletter and YouTube videos, we enjoyed bringing you all original, somewhat rough at times information as we see it through our eyes!
In Closing
Your Fourth Quarter summary is enclosed on the front page of this report we have included our most recent investment allocation from your Investment Policy Statement. This is also the time we attach our Private Policy Statement for the year along with our opportunity to offer our latest ADV filings; Requests for review will be accepted via phone, mail or email, and mailed immediately upon request.
Sincerely,
John A. Kvale CFA, CFP
Enclosure (2019 Report, Private Policy)
J.K. Financial, Inc.
PRIVACY POLICY NOTICE
Our Promise to You
As a client of J.K. Financial, Inc., you share both personal and financial information with us. Your privacy is important to us, and we are dedicated to safeguarding your personal and financial information.
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In the normal course of doing business, we typically obtain the following non-public personal information about our clients:
- Personal information regarding our clients’ identity such as name, address and social security number;
- Information regarding securities transactions effected by us; and
- Client financial information such as net-worth, assets, income, bank account information and account balances.
How We Manage and Protect Your Personal Information
We do not sell information about current or former clients to third parties, nor is it our practice to disclose such information to third parties unless requested to do so by a client or client representative or, if necessary, in order to process a transaction, service an account or as permitted by law
In order to protect your personal information, we maintain physical, electronic and procedural safeguards to protect your personal information. Our Privacy Policy restricts the use of client information and requires that it be held in strict confidence.
Client Notifications
We are required by law to annually provide a notice describing our privacy policy. In addition, we will inform you promptly if there are changes to our policy.
Please do not hesitate to contact us with questions about this notice.
A True Yogi Berra saying may be fitting now – “It’s like déjà vu all over again!”
Tariffs and Trade War Talks Continue
While the tariff banter seems relentless and every day changing, leading to Capital Market bipolar movements, one day irrational exuberance, and the next day irrationally depressed, as mentioned in our Q4 Newsletter, tariff talk has been going on for decades. With today’s constant bombardment of immediate news stories and short clips it seems, present party included, to be constant and all encompassing. The reality is this likely will work itself out, just as seen in the graph in the newsletter. Our bet is once the tariff talk turns into tariff agreements, we will see market relief and higher overall interest rates. For now, there’s no doubt that the tariff talk is slowing the global economy and there is no envy for public company managers trying to navigate the possible changes that occur on a day by day basis, making it very tough to stock inventory and make purchases.
Treasury Rates- Interest rate cycle
Given the afore mentioned Tariff Talk, FOMC (Federal Open Market Committee) led by chief Jerome Powell and a company have embarked on a lowering of rates, twice to be exact, but only two .25 basis points each, in an attempt to help ease interest rate burdens and spur the economy. While not huge fans of the lowering of rates at this time due to gun powder needs at a future, when the inevitable recession occurs, at this time it appears we are on an interest rate decrease path, a complete 180° turn from just one year ago, when reserve officials were raising. If there is an agreement in Tariff talk, lowering of rates would likely stop, and we might even hear talks of raising, making for an interesting rate cycle. Time will tell.
Taxes or the savings of taxes paid
As we head into the final quarter of the year it’s time to make sure we’ve done all we can do for this years’ , especially items that have no look back features. As also mentioned in our Q4 newsletter, be sure to max those 401(k)s, contribute or distribute from 529‘s, complete Required Minimum Distributions (RMD’s) and make sure those charitable giving are complete this year, as all of these items have a hard stop year-end deadline.
Have a great day and start to fall!
Sincerely,
John A. Kvale CFA, CFP
Enclosure 2019 Report
32.862841
-96.808100
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Second Quarter 2022 Review, Half Way Point, All about the Fed
The Halfway Point
While we have just reached the halfway point of 2022, for what it’s worth in seemingly much faster fashion than prior several years, likely due to the various lockdowns that we endured, even with such seemingly speed of time, there has been a tremendous amount of interesting events that have occurred so far this year!
All about the FED, once again
After multiple years of Federal Reserve stimulus both through lowering of interest rates and large asset purchases, as the calendar turned the federal reserve, FOMC, led by Jerome Powell pivoted and moved their foot from the accelerator to the brake. Not only has the FOMC pivoted to the brakes, but they have put both feet firmly on said pedal. First talking aggressively about rate increases leading up to the fastest interest rate increases on a percentage basis that have ever occurred, putting headwinds in safe assets also known as bonds or fixed income, but the other foot on the pedal included reversing asset purchases through balance sheet runoff.
The first glimmer of easing of the brakes by the Federal Reserve occurred several weeks ago in a public testimony by Jerome Powell in which he stated the federal reserve cannot control oil and food prices. Capital Markets participants read that to be not as aggressive in posture, maybe one foot easing off the brake.
Literally the last week of the quarter, the second major event occurred oddly enough from the research partner at the Atlanta Federal Reserve. The Atlanta Federal Reserve research department has a forward looking predictive model that attempts to predict GDP (gross domestic production), the most blunt instrument of economic activity. Just days ago, they updated their model from an expectation of 1% growth in Q2 2022 to -2.1% growth or an actual contraction. While seemingly unimportant, this estimate if true would mark the official R word for the economy – Recession. This second event was even more impactful as market participants began pricing in an even less firm brake pedal fed.
Persistent hot CPI Consumer Price Index reports present challenges
Back to the Jerome Powell lead FOMC, one of their favorite inflation measuring sticks, the CPI or Consumer Price Index a very blunt measuring instrument of price increases and inflation measures, looks to remain high, mostly due to the severe lag effects of some of the input data. This puts the FOMC in a pickle, with the aforementioned possible R word and a slowing economy, but lagging blunt measurement showing high blood pressure in the economy a.k.a. the CPI . Not a fun time to be a member of the FOMC!
How about some positives?
In our latest newsletter, hopefully already on your reading table, we point out in multiple graph format tons of positives. While some may say were looking through rose colored glasses, we prefer to say the glass half full. Of course, these can change, but the pictures we pointed out at the time, were positives.
Time is our friend on all of these matters, be sure to avoid the ugly headlines which most certainly will continue likely throughout the remainder of this year, we have your back and will talk to you at the end of the next quarter!
Sincerely,
John A. Kvale CFA, CFP
Enclosure (2022 Report)
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Posted in Clients/Clients Only, Economy, FOMC, Interest Rates, Investing/Financial Planning, Market Comments, Performance Report Cover Letter, Retirement Planning
Tagged Cover Letter, Quarterly Cover Letter, Quarterly Performance Cover Letter