September Newsletter to Clients

Enjoy this month’s edition that features Steve Martin’s take on the stock market – kind of – and some tips from Schwab on avoiding scams.

There’s a scene in the Steve Martin film, Roxanne, where he puts a quarter into a newspaper rack, pulls out the paper, glances at the headline and then screams. He quickly runs back to the machine, inserts another quarter, opens the machine and puts the newspaper back. It’s a laugh out loud moment but you can be forgiven if that’s how you feel about world events these days. With inflation, geopolitical uncertainty and dirty lettuce, it’s easy to assume all the bad news extends to the economy and the stock market. But, at least so far, that’s not been the case. In fact, the chair of the Federal Reserve, Kevin Warsh, said in a speech recently, “One indicator of strength is how well an economy holds up to shocks. On that score, both Main Street and Wall Street have been remarkably resilient.”

To support that remark one need only look at the S&P 500 Index of large, U.S. companies. The second quarter per-share earnings growth rate was 52%, the highest level since the Covid rebound in the second quarter of 2021. In addition, sales were up 16%. This wasn’t driven just by the so-called Magnificent Seven tech companies but others such as Target, J.M. Smucker and Deere are also ringing up heftier sales and earnings. And, those higher earnings are justifying the higher stock prices.

The S&P 500 Index was up 2.6% in August – it’s best August since 2021. Other stock indices are up too. The U.S. Aggregate Bond Index, however, is down 0.30% year to date mainly because inflation has pushed bond yields higher and bond prices down. 

This era of the A.I. boom has been compared to the dot-com boom and bust at the turn of the century. Then, the U.S. stock market lost almost half its value between the 2000 peak and the 2003 trough, but the U.S. economy suffered only a mild, brief setback. And, of course, computers did ultimately revolutionize the world. There probably isn’t much question that A.I. will change the world too – for better or worse, or both, isn’t clear yet. But, one respected economist, Ed Yardeni, believes there is an 80 percent chance this decade is the “Roaring 2020s” characterized by tech-driven productivity gains and a bull market in stocks. 

If the S&P 500 reaches 10,000 by the end of this decade – it’s at 7,681 as I write this – it will have gained the third most for all decades since the 1870s. Yardeni sees no recession on the horizon and tries to disregard politics in assessing the markets. “Under both political parties, I’ve found the U.S. economy is incredibly resilient.” As you know, we at Moneywatch don’t try to predict market ups and downs over the short-term – we build portfolios specific to each client’s time horizon and needs and we diversify those portfolios to help smooth out the ride. 

Schwab has some tips on avoiding remote access scams:

A remote access scam is a type of fraud where criminals pretend to be someone from your financial institution, the government or another trusted organization. They tell you your account has been compromised and pressure you into installing remote access software so they can fix the issue. Once installed, they take over your account to steal. Here’s how we stay safe:

Stop: Even if a message or call sounds important, think at least twice before downloading software or allowing access to your device;
Drop: When in doubt, hang up the call, trash the email, delete the text or close the website. Fraudsters can’t get access to your devices if you don’t install anything;
Remove: If you think you’ve been targeted, remove any remote access software and run an anti-virus scan to remove any viruses. If you don’t feel comfortable doing it yourself, ask a professional to check and clean your device.

As always, if you have questions about any of your financial accounts, feel free to call the office and run your questions past us.

Thank you for your continuing confidence.