Hope you are all doing well. The S&P 500, the NASDAQ, and the Dow all fell less than 1%, snapping a string of five positive weeks in a row. Each of the major indexes retreated from record highs set the previous week as inflation concerns weighed on financial markets. I have broken down this week’s news using Britney Spears songs, as the Free Britney movement came to an end this week with the pop star being released from conservatorship.
Oops!… I Did It Again
The Consumer Price Index (CPI) topped 5% again making 5 months in a row. Inflation, which has stayed dormant for the past three decades, is proving to be not that innocent. The government reported on Wednesday that the CPI jumped to 6.2%. The monthly measure of U.S. consumer prices climbed to the highest level since 1990. The market was rattled by the fact that even if you take out the often-volatile categories of food and energy, the inflation rate was 4.6%. Inflation has shaken consumer confidence as the index which measures it fell more than expected and registered its lowest level in 10 years.
Bonds continue to be toxic. Bonds are supposed to be low volatility and safe. That has not really been the case lately. As I have stated previously, I believe portfolios should NOT be heavily weighted in bonds. If your 401k is invested in a target date fund 2030 or sooner, you are likely at least 40% in bonds and it makes sense to make changes. Feel free to schedule an appointment to discuss. The yield of the 10-year U.S. Treasury bond climbed to 1.58% on Friday, up from 1.45% at the end of the previous trading week. Remember, bond prices move opposite interest rates.
The volatility in cryptocurrency is crazy, it can be exciting if you’re not in too deep. The price of bitcoin surged to a record high, only to give up much of its gain later in the week. After ending the previous week at around $61,000, the cryptocurrency briefly surged above $68,000 on Wednesday. Bitcoin couldn’t sustain that peak level, and the price ended the week around $62,000. It wasn’t just crypto surging gold is also rising. Inflation concerns provided a catalyst as the price of gold climbed to the highest level in more than five months. I have received many questions about crypto, gold and silver. I don’t believe they should be a core part of your portfolio. If you wanted to invest 2-3% of a portfolio for a hedge it is OK but realize that investing in that space involves substantial risk of loss.
Employers are still having a difficult time filling open positions. The U.S. government reported on Friday that employers still had 10.44 million job openings in October, declining modestly from the 10.63 million openings reported two months earlier. Friday’s report also showed that a record 4.4 million Americans quit their jobs in September.
Expect the market to be volatile, and perhaps pull back over the next few weeks. The right thing to do is to stay invested and tune out the noise. Corporate earnings are growing at record rates and stocks remain the best place for money that is earmarked for growth. I am here to help at any time. If you would like to schedule a phone/web conference appointment, I have included a link to my calendar below and you can self-schedule.