Monday Morning Market Insights: Last Week in Review with Rusty Vanneman, Vol. 61
- Congrats to the winners of this year’s March Madness brackets. The 18-year-old in my house is going to the University of Kansas next year, so it’s no surprise that he’s won our extended family bracket this year. Spring must be here because it’s Master’s Week!
- Looks like a quiet start to the markets this week. The most exciting market news is that Elon Musk took a large stake in Twitter and the stock was up big Monday morning.
- The US stock market gained ground last week and even finished March with a gain. Nonetheless, last Thursday closed the worst quarter for stocks in two years.
- Coming into the new week, the overall US stock market is down less than 5% on the year. Most parts of the stock market are down on the year. So, what’s actually up in price?
- Value stocks are up nearly 3%, primarily because energy stocks are up nearly 40% year-to-date.
- The overall bond market is down about 6% for the year, but other diversifiers are higher. Diversified alts have a slight gain and commodities are up 25% year-to-date.
- The rise in Ten Year Treasury Yields, perhaps for now, stopped last week. Yields closed at 2.38% last Friday (down 11 basis points in one week). The recent highest yield was just over 2.50% which again was its highest levels since early May 2019.
- Economic news from last week featured Friday’s employment report:
- Nonfarm payrolls increased 431k versus an expected 490k.
- The unemployment rate fell to 3.6% in March from 3.8% in February.
- Average hourly earnings are up 5.6% versus a year ago (which is great, except it’s below inflation)
- Notably, the median duration of unemployment fell to 7.5 weeks, which is lower than it was pre-COVID, meaning those who lose their jobs are not staying unemployed for long.
- Continuing unemployment claims are the lowest since the late 1960s.
- Payrolls are still 1.6 million short of where they were before COVID.
- By the way, for a frame of reference, the lowest unemployment rate in modern economic times was 2.5% in the early 1950s. The labor market is so hot, it would not be a surprise to see that number challenged.
- Another inflation report last week, and another 40-year high. This was the highest since January 1982. For a frame of reference, Olivia Newton John’s “Physical” was the #1 song all that month until Hall and Oates’ “I Can’t Go For That” finally broke Olivia’s hold on #1. For me, that was a very long time ago in a galaxy far away. For some reading, you may not even know those artists!
- Speaking of inflation, for the first time ever in NYC, the average cost of a slice of pizza is more than a subway ride. The average cost of a regular slice is now $3.14, compared to a subway fare of $2.75, according to Bloomberg.
- Bloomberg’s John Authers had a great overview of the first quarter and how record-setting it was. He writes a daily article that is always loaded with nuggets. This article was no different, including what happens to the stock market when the yield curve reverts.
- This week’s economic schedule has some housing data and Federal Open Market Committee (FOMC) minutes, but otherwise not much. Earnings season doesn’t really begin for at least another week.
- The AAII Investor Sentiment Survey has the first (albeit slight) majority of bullish investors this year. Technically, investor confidence is still less bullish than the long-term average.
- When it comes to investing, men are more likely to panic than women.
- As mentioned last week, from a seasonal perspective, April is typically a great month in the markets. Since 1990, the S&P 500 has been higher 74% of the time in April (Yahoo Finance, April 2022).
- Why diversify into non-US stocks? Besides the possibility of enhancing returns, it is also about volatility reduction. Here is page 45 of the quarterly OPS Reference Guide. According to a study by Vanguard, the maximum volatility reduction is about 40% of an equity portfolio in non-US stocks. That also happens to be the approximate current weight of non-US stocks in the overall global equity market.
Crypto Corner – Grant Engelbart, CFA, CAIA, Brinker Capital Investments, Sr. Portfolio Manager
- Another green week for crypto prices. Bitcoin was hovering around $46,300 as of Sunday afternoon, a 3% return on the week. Ethereum was nearing $3,500 for almost a 10% gain. Solana +33%, Terra +26%, and Avalanche +13% all had a strong week. Bitcoin closed out the first quarter down slightly -1%. That return masks the volatility of the quarter – prices fell -17% in January, then rebounded 8% in February, and almost 10% in March. Ethereum fell -11% for the quarter.
- $622 million worth of Ethereum and USD Coin held in reserves for a popular video game, Axie Infinity, were stolen from a network bridge called Ronin. It is one of the largest crypto hacks in history, however, the funds may have already been located. The 19 millionth Bitcoin was mined last week, leaving only 2 million more to ever be mined. It has taken around 12 years to mine 19 million Bitcoin but will take over 100 more years to mine the final 2 million.
- Grayscale, which runs the $30 billion Grayscale Bitcoin Trust (GBTC), has threatened to sue the SEC if their proposal to convert to a spot Bitcoin ETF is denied. The SEC rejected ARK’s bitcoin ETF application.
- Some people are just wired to make money. This week on Orion’s The Weighing Machine podcast, we interviewed one of them, portfolio manager David Sherman from the Crossing Bridge Funds, an important holding in the Destination funds. David’s experience goes back to the Drexel Burnham days and high yield bonds (once upon a time, if you were in the investment industry, the book on Drexel called “The Predator’s Ball” was required reading). He seems to do a lot of stuff now, and it seems to be all about making money, including managing the successful CrossingBridge Funds.
- Speaking of podcasts, here are two of the top contemporary BeFi (behavioral finance) experts on one quick podcast, including Orion’s Dr. Daniel Crosby.
- And while I’m giving out Be-Fi love, let’s look at some Morgan Housel stuff from last week including “8 Things from the book The Psychology of Money” and I can’t recommend this article enough that I quoted from last week “How People Think”. Expect more quotes/excerpts from this article in future Bullets!
- “Good marketing can sell once, but only a good product can sell twice. In the long run, your performance reverts to the value you provide.” James Clear
- The 10 best extensions for Chrome.
- Want to perform better and live healthier? Biohacking fundamentals.
- Thanks for reading and have a great week! For more resources, please check out the Financial Advisor Success Hub, and as always, please let us know what we can do better at email@example.com or firstname.lastname@example.org.
- Have a great week!
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