What We Were Reading and Watching this Week
Economy
The unemployment rate was released Friday morning, reaching 4.0%, surprising on the upside. This is up 0.6 percentage points from the cycle low of 3.4%.
This bares watching, as increases in the unemployment rate of more than 0.6 percentage points from a cyclical low have confirmed each of the last 12 recessions, with only one false signal in 1959.
Recessions
The call of a recession is made by the nonprofit National Bureau of Economic Research.
This organization first researched, and defined, business contractions, and expansions, back in the 1930s.
Information about the NBER can be found here: https://www.nber.org/
Since the NBER wants to be sure of its call of a recession, they wait until all the important economic data has been reported. This results in a big delay in reporting the peak of economic activity, as well as the bottoming.
By then, the information is no longer useful.
So, most Economic Researchers use economic data that predicts overall business contraction.
We have mentioned one of these in our past updates, the Leading Economic Indicators Index, put out by the Conference Board.
The Conference Board, founded in 1916, is a member driven think tank, that delivers insight on what's ahead.
Information about this organization can be found here: https://www.conference-board.org/about
The Leading Economic Indicators Index comes out mid month, with data updated for the previous month. We will post these updates when available.
Markets
Stocks
The S&P 500 closed up 1.32%, to 5,346.99, as investors look forward to the the upcoming June FOMC meeting to provide more insight into when the rates cuts may arrive.
Year to date, S&P 500 up 12.63%.
Bonds
The 10 Year Treasury closed the week to yield 4.43%, down slightly for the week.
Gold
The price of gold closed down for the week, to $2,310.80 per troy ounce.
Up 11.70% YTD.
TECHNICAL UPDATE
Stock Market
The key distribution indicator, and still overall selling into up markets, continues to signal a neutral positioning.
Market breadth was very narrow this week, with gains concentrated in fewer stocks.
The Magnificent 7
The Magnificent 7 stocks are a group of mega-cap stocks that drive the market’s performance due to their heavy weighting in major stock indexes such as the Standard & Poor’s 500 and the Nasdaq 100.
The Magnificent 7 includes the following stocks:
- Apple (AAPL)
- Microsoft (MSFT)
- Alphabet (GOOG and GOOGL)
- Amazon (AMZN)
- NVIDIA (NVDA)
- Tesla (TSLA)
- Meta Platforms (META)
These 7 growth stocks were responsible for more than half the gain of stocks last year.
The S&P 500 on a total return basis was up 26.6%, but without these 7 stocks, the return would have been just 11.1%. Over 40% of the stocks in the S&P 500 fell last year.
So far this year, all but one of the seven continues their run. Top performer Nvidia has almost doubled since May 10th, with Tesla down -28.57% this year.
This reminds me of other times where investors attention was focused on a small group of stocks. In the 1970s, it was the Nifty Fifty, where companies like Winnebago, McDonalds, Disney, and Polaroid, were being bid up by excited investors. All were trading at sky high valuations, relative to their current earnings, on the promise of unlimited growth.
The Dot Com Bubble was another example where an entire sector, Technology, got all of the attention. At its peak, tech stocks made up 40% of the S&P 500 Index's composition.
Tech now makes up 30%, and would be more, if not for a reclassification that moved some tech stocks to other sectors.
Speculative Bubbles
Throughout our country's history, there are many examples of speculative bubbles.
In his book, Venture capitalists Fred Wilson said, "A friend of mine has a great line. He says "Nothing important has ever been built without irrational exuberance. "
Which means that you need some of this speculative mania to cause investors to open up their pocketbooks and finance the building of the railroads or the automobile or aerospace industry, etc.
And in the Dot Com case, much of the capital invested was lost, but also much of it was invested in a very high throughput backbone for the Internet, and lots of software that works, and databases and server structure. All that stuff has allowed what we have today, which has changed lives.
I would agree with this assessment, however, as investors looking to protect hard earned retirement assets, focusing on a strategy that can benefit from unique opportunities, while being defensive when warranted, can be just what is needed in this extraordinary time.
Stanton Group Risk Management Historical Net Long Positioning
Please schedule a call to review historical and current positioning using our Core & Protect Risk Management Process, our research, and our model portfolios.
https://calendly.com/jstanton-1/stanton-group-introduction-with-john-stanton
Retirement Living
Where to live in retirement, is a topic that comes up often in our client meetings.
I just received a Relocation Guide put out by Ideal-Living.
Ideal-Living is an online, and in print resource, that offers extensive information designed to inform, and help people explore relocation destinations.
The guide is packed with information such as Cost of Living, Climate, Taxes, with State Summaries, International destinations, and information on developments.
It's well done, well organized, and I am looking forward to reviewing further.
You can order your copy here, if interested.
https://ideal-living.com/relocation-package/
John is the founder of The Stanton Group WP. With more than three decades of experience in the financial services industry, and through SeaCrest Wealth Management, LLC, serves as the Registered Investment Advisor Representative for clients, focusing on financial planning and the investment strategies to support their financial plan.
Based in Naperville, Illinois, John serves clients in Naperville, Plainfield, Darien, Aurora, Geneva, St Charles, and throughout the Chicagoland area.
Learn more about John’s services by visiting www.stantongwp.com
John can be reached at l 630-445-2380 or email JStanton@seacrestwm.com.
The Stanton Group WP provides investment advisory services through SeaCrest Wealth Management LLC, (the “SWM”) a registered investment advisor. SWM is a registered investment advisor (“RIA”), with the U.S. Securities and Exchange Commission located in the State of New York. SeaCrest Wealth Management, LLC can be reached at (914) 502-1900.
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