Financial Markets

May 10 2024

Warren Buffet Speaks

Julie MurphyInvesting Financial Markets, investing, retirement, stock market, warren buffet

Warren Buffett, the “Oracle of Omaha,” held court at the annual Berkshire Hathaway meeting in early May. Few events on the American business calendar are so hotly anticipated, and there is no hotter ticket in Nebraska- perhaps the entire Midwest!¹

Notably absent was Buffett’s longtime business partner and comic foil, Charlie Munger, who passed in 2023. Munger worked with Buffett for over a decade before becoming Berkshire Hathaway’s vice president and sounding board. In his wake, discussion of succession for the 93-year-old Buffett was in the air. Greg Abel, chief of Berkshire’s non-insurance operations, is the heir apparent and has the venerable CEO’s public endorsement.²

Despite these topics, the atmosphere was anything but somber. Buffett did not disappoint, treating his audience to his opinions on various topics. Notably:

AI: Buffett is unambiguously a skeptic of artificial intelligence and made headlines with his warning: “We let a genie out of the bottle when we developed nuclear weapons. AI is somewhat similar—it’s part way out of the bottle.”¹
Overseas: Buffett spoke on his company’s future in Asia. “I am sure there are loads of opportunities in countries like India.” However, he anticipated that he would not explore those opportunities as much as his successors would.³
Domestic: Another hot topic was BH’s investments related to major companies and big deals in the news. On Apple, “We have sold shares and I would say that at the end of the year, I would think it extremely likely that Apple is the largest common stock holding we have,” indicating that the sale was for tax purposes. Buffett took responsibility for a less-than-successful investment while discussing Paramount, saying: “We’ve sold it all, and we lost quite a bit of money.”^4,5
Any companies mentioned are for illustrative purposes only and should not be considered a solicitation for the purchase or sale of securities. This email is an update on Buffett’s annual report. Consult your tax, legal, and accounting professionals before modifying your tax strategy.

Warren Buffett is one of the most fascinating American business figures alive. He retains a financial imagination that looks into the future. However, he is realistic that a smart succession is important, even though he didn’t signal his retirement, quipping to the audience: “I not only hope you come next year. I hope I come next year.”⁶

^{1. Wsj.com, May 4, 2024, “Warren Buffett Fears AI Has ‘Enormous Potential for Harm’”}
^{2. Cnn.com, May 4, 2024, “Warren Buffett holds first Berkshire Hathaway meeting without Charlie Munger”}
^{3. Economictimes.indiatimes.com, May 6, 2024, “Buffett says India has ‘unexplored’ opportunities”}
^{4. Foxbusiness.com, May 6, 2024, “Buffett explains Berkshire’s reduced stake in Apple at annual company meeting”}
^{5. Wsj.com, May 4, 2024, “Warren Buffett Praises Apple After Berkshire Hathaway Cuts Stake”}
^{6. Cnbc.com, May 5, 2024, “Warren Buffett weighs in on his own mortality at this year’s Berkshire Hathaway annual meeting”}

Man sitting on mountain ledge representing fear

October 7 2023

Why Are Investors So Fearful?

Julie MurphyInvesting, Market Financial Markets, investment strategy, market volatility

If you’re a fan of Warren Buffett, you’ll recognize this quote: “Be fearful when others are greedy and greedy when others are fearful.”

In recent weeks, the investing outlook has become a bit murky, which has led some people to let their emotions get the best of them.

As you can see from the accompanying chart, fear—almost extreme fear—has become the driving force for investment decisions as the Fed talks tough about “higher for longer” with interest rates and the price of oil flirts with $100 a barrel.

So, is it time to be fearful, or are the markets just moving through another cycle? That’s difficult to determine, but you don’t have to look very far if you’re looking for reasons to be scared.

A recent CNBC survey of 300 money managers found that 61% believe the stock market’s gains this year can be attributed to a “bear market rally,” and 41% expect a recession by mid-2024.

This leads me to another one of my favorite Wall Street expressions: “Bull markets climb a wall of worry.”

Let people be fearful. Let them worry about what’s next. At times like this, focus on your investment strategy that reflects your goals, time horizon, and risk tolerance. We anticipated there would be some bumps along the way.

^{1. CNBC.com, September 27, 2023. “Investors see 2023 gain as a bear market bounce and expect a recession next year, CNBC survey shows.”}

April 4 2023

Weekly Market Insights: Banking Crisis Fears Dim; Markets Rally

Julie MurphyMarket Financial Markets, Investment, market insights, stock market

Stocks rallied last week on receding fears of a widening banking crisis, led by resurging investor interest in technology and communication services names.

The Dow Jones Industrial Average gained 3.22%, while the Standard & Poor’s 500 added 3.48%. The Nasdaq Composite index rose 3.37% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced by 3.34%.^1,2,3

Tech Leads Rally

An absence of further bad news in the banking sector made for a good week, with high-quality technology and communication services stocks leading the market. While easing banking worries laid the groundwork for the week’s positive gains, growing conviction that Fed rate hikes were ending and positive inflation data out of Europe helped support the renewed enthusiasm for stocks.

Encouraging inflation data on the domestic front on Friday also added to the gathering optimism, igniting further gains to cap a satisfying week for investors.

Inflation Grinds Lower

In an otherwise news-light week, Friday saw the release of February’s personal income and outlays report, which provides insight into inflation and consumer expenditures, the dominant contributor to economic growth.

The Personal Consumption Expenditures Price Index (PCE), the Fed’s preferred measure of inflation, rose 0.3% for the month, below market expectations and below the prior month’s 0.6% jump. The year-over-year increase of 5.0% improved from January’s rise of 5.3%. Energy prices declined, partially offsetting increases in food, goods, and services. Personal income rose 0.3%, while consumer spending increased 0.2%.⁴

This Week: Key Economic Data

Monday: Institute for Supply Management (ISM) Manufacturing Index.

Tuesday: Factory Orders. Job Openings and Turnover Survey (JOLTS).

Wednesday: ADP (Automated Data Processing) Employment Report. Institute for Supply Management (ISM) Services Index.

Thursday: Jobless Claims.

Friday: Employment Situation.

^{Source: Econoday, March 31, 2023

The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.}

This Week: Companies Reporting Earnings

Wednesday: Conagra Brands (CAG).

Thursday: Constellation Brands (STZ).

^{Source: Zacks, March 31, 2023

Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.}

“Our destiny is in our hands […] So let’s build the future we all know is possible. Let’s prove to our children that they really can reach for their dreams.”

– Michelle Obama

What Is The IRS Alternative Media Center?

The IRS Alternative Media Center offers a variety of resources and accessibility services for visually impaired taxpayers. Using this platform, they provide tax-related content in several formats, including:

Text-only
Braille-ready files (available in English and Spanish)
Browser-friendly HTML
Accessible PDF (available in English and Spanish)
Large print PDF (available in a variety of languages)

The IRS also offers enhanced accessibility services. Taxpayers can complete Form 9000, Alternative Media Preference, to choose how they would prefer to receive their tax notices (ex: in Braille, large print, audio, or electronic formats). They also have an accessibility helpline that can answer questions related to accessibility services.

*This information is not intended to substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁵

Controlling Different Kinds Of Light To Help You Sleep Better

Controlling your environment, including your exposure to light, may help you sleep better at night.

Increase bright light exposure during the day
We know it’s beneficial to keep your room dark while you sleep, but it’s also helpful to get more bright light throughout the day! This contrast may help reset your circadian rhythm.

Reduce blue light exposure at least an hour before bed
Blue light may make it hard for our brains to relax and go to sleep. Because of this, some sleep experts recommend limiting blue light at least an hour before bedtime. You can also turn “night mode” on, giving your device screens a gentler yellowish hue than blue light.

Tip adapted from WebMD⁶

Two couples played paintball. Each person had blue, green, yellow, or red paint, and wore a uniform in one of those same colors. Barbara used blue paint. The person wearing green used yellow paint. Steven did not wear the red uniform. Vicki used green paint and wore blue. Ian used the same color paint as his t-shirt. Can you match each person to the color of paint and uniform they used?

Last week’s riddle: Name three consecutive days without using the words Monday, Wednesday, Friday, or Sunday. Answer: Yesterday, Today, and Tomorrow.

Atacama Desert, Chile

Footnotes And Sources

^{1. The Wall Street Journal, March 31, 2023}

^{2. The Wall Street Journal, March 31, 2023}

^{3. The Wall Street Journal, March 31, 2023}

^{4. CNBC, March 31, 2023}

^{5. IRS.gov, January 4, 2023}

^{6. WebMD.com, November 16, 2022}

^{Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.}

^{The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.}

^{The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.}

^{The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.}

^{U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.}

^{International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.}

^{Please consult your financial professional for additional information.}

^{This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.}

February 26 2023

Recession Fears Fading?

Julie MurphyMarket, Small Business Financial Markets, recession, stock market

Investors put the economy on recession watch when the Fed started its “higher in a hurry” push with short-term interest rates in mid-2022.

After the 10-year/2-year Treasury curve inverted in July 2022, it was “all aboard” the recession bandwagon. Then the business community followed suit, with CEOs hunkering down and preparing companies for a slowdown in the economy.

But in the past few weeks, CEOs seem to have changed their tune. In fact, only 12 percent mentioned the word “recession” in the Q4 2022 calls with investors. (See chart.)

So what changed? A few things. Fed Chair Jerome Powell sounds a bit more dovish with his recent comments. After a good Q4, the financial markets have been improving in 2023. And the ongoing strength in the jobs market has more people believing the economy may be headed for a soft landing.

When CEOs are confident, they prepare their companies for an expansion phase of the business cycle. New companies are started, Innovation gets funded, and breakthrough changes become possible.

I hope the early 2023 enthusiasm builds momentum as the months progress. I know that my optimism grows as I see CEOs confidently pushing ahead.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2023 FMG Suite.

Stubborn child testing mothers resolve at breakfast

October 19 2022

Stubborn Inflation Tests Fed’s Resolve

Julie MurphyInvesting, Market feds, Financial Markets, inflation, investing, market

Stubborn doesn’t seem like a strong enough word, but that’s how Fed officials are describing inflation.

Inflation’s “stubbornness” has been on full display in recent weeks: First, the Producer Price Index (PPI) showed that costs remain high for producers of goods and services. Then in September’s more widely followed Consumer Price Index (CPI) high prices continued to persevere.

To address inflation, the Fed’s primary tool is short-term interest rates. As it pushes rates higher, the Fed aims to slow the economy by raising borrowing costs. As economic activity cools, the Fed expects to see the CPI and PPI trend lower.

In the table below, you can see what professional traders anticipate will happen with interest rates over the next year. They expect the Fed will have to raise short-term rates to nearly 5% in 2023 to lower inflation.

We know this year has had its ups and downs. Just when it appears to have turned a corner, something else happens, and the financial markets are under pressure again.

You may have heard the old saying: “Don’t worry about the horse, just load the wagon.” Now is an excellent time to stay focused on what you can control, like your “wagon,” and we’ll keep an eye on the “horses” in the meantime.

October 3 2022

Weekly Market Insights: U.S. and U.K. See Financial Turbulence

Julie Murphy401k, Investing, Market Financial Markets, market volatility, stock market, stocks

Rising recession fears and uncertainty in the bond and currency markets sent stocks to new 2022 lows last week.

The Dow Jones Industrial Average declined 2.92%, while the Standard & Poor’s 500 slumped 2.91%. The Nasdaq Composite index fell 2.69%. The MSCI EAFE index, which tracks developed overseas stock markets, lost 1.94%.^1,2,3

A Tumultuous Week

U.S. stocks were under pressure all week due to recession concerns and unsettled trading in the bond and currency markets. This stress followed economic steps out of the U.K. During the previous week, the Bank of England (BOE) raised interest rates, and its prime minister announced unfunded tax cuts that the markets interpreted as inflationary.

U.S. bond yields rose early last week, sending stocks lower until Wednesday’s rally following news that the BOE would buy U.K. government bonds. U.S. stocks resumed their descent the following two days to close out a disappointing week, month, and third quarter.

The Bank Of England Acts

Global bond and currency markets have been volatile recently due to global central bankers raising interest rates to combat inflation. Developments in the U.K. took center stage last week when the BOE announced it would be buying long-dated U.K. government bonds. Upending the financial markets was the previous week’s announcement of tax cuts by the country’s new prime minister, a step many investors viewed as counterproductive to the BOE’s inflation-fighting efforts.

The BOE’s decision to begin temporary purchases of government bonds was well-received by capital markets, sending U.K. bond yields lower and boosting U.K. stock prices in the immediate aftermath.