Bad news sells. And because bad news sells, it is everywhere. The best investors know how to tune this out, or at least not let the media bias impact their behavior. We are often our own worst enemies when it comes to investing, letting our emotions get in the way of rational decision-making. Whether it is the debt ceiling or egg prices dominating the latest news cycle, staying fully invested for the long term at the right level of risk for you is your best chance for success.
We talked about the debt ceiling last week. The world as we know it is coming to an end… until it isn’t. Tune it out. Are we guaranteeing a clean solution? No. But the most likely path is a deal that avoids default, and betting one way or another on the outcome is just that… a bet (i.e., not an investment).
For a more light-hearted example of the state of today’s news flow, we turn to eggs. How many stories have we seen this year about the soaring price of eggs? They were everywhere! As a nation, we consume over 90 billion eggs annually, which is a lot. But eggs represent less than 0.1% of our average annual expenditures. Yet the media was obsessed with soaring egg prices, which had everything to do with a one-off avian flu event and very little to do with general inflation. There is nothing wrong with reporting this news, but now that egg prices have nearly declined to where they started, where are all the positive news stories about low prices? There are some, but they are few and far between.
Investing is a long-term venture, and news of the latest high-profile debate in Washington or soaring egg prices should not impact your risk tolerance or portfolio mix. News tends to be biased negatively, but long-term equity and bond returns tend to be biased positively. Don’t let the never-ending stream of scare stories hurt your ability to capture the full extent of what the investable markets offer.
Headline of the Week
Tea Leaves (revisited)
Reading the macro-economic tea leaves is always challenging, and this point in the economic cycle is no different. As earnings season ends, there were a few leaves worth reading. Generally, companies were able to beat much-lowered expectations, and reports were vastly better than feared. Banking stress was a key theme this quarter, but companies offered some fresh perspectives on the state of the consumer.
Target, Walmart, and Home Depot offered different takes but seemed to reinforce a theme of strength with retrenchment. Target saw customers shying away from trendier items in favor of necessities, Walmart saw increased sales, and Home Depot saw declines in major home renovations. Consumer balance sheets remain strong, but sentiment is softening. People appear to be reining in spending on discretionary and higher-end purchases in favor of everyday items, arguably enhancing the soft-landing thesis.
The Week Ahead
The debt ceiling negotiations drama continues, with every development scrutinized by investors. In other news…There will be a G7 meeting in Japan and a PGA Championship played in Rochester this weekend. On the economic front, the Federal Reserve’s meeting minutes, another look at the Gross Domestic Product, and an inflation reading will add kindling to market volatility.
Working the Core Down to Four
Inflation watching kicks in gear again as we gauge the Central Bank’s next move with the Personal Consumption Expenditures Index (PCE) next week.
- The market believes the core PCE, which excludes food and energy, is the preferred inflation measure the Federal Reserve focuses on.
- Current forecasts expect a decline of 0.2% to 4.4% in April.
- Another ease in inflation would be a relief, especially if we can get down to 4%.
Gross Domestic Product (GDP) for the 1st quarter will be revised.
- The initial release indicated a slight expansion of 1.1%, dragged down by lowering inventories but boosted by consumer spending.
- No change to the first report is expected, but a surprise revision may cause some unease.
The details of the last Federal Reserve meeting should uncover the thinking behind the most recent rate hike.
- Since the post-meeting press conference was primarily uneventful, Fed watchers will turn to the meeting details for color.
- Investors will look for clues if the Fed is done hiking and the hand count of who voted to hike.
Founded in 1979, Strategic is a leading investment and wealth management firm managing and advising on client assets of over $1.8 billion.Overview
Strategic Financial Services, Inc. is a SEC-registered investment advisor. The term “registered” does not imply a certain level of skill or training. “Registered” means the company has filed the necessary documentation to maintain registration as an investment advisor with the Securities and Exchange Commission.
The information contained on this site is for informational purposes and should not be considered investment advice or a recommendation of any particular security, strategy or investment product. Every client situation is different. Strategic manages customized portfolios that seek to properly reflect the particular risk and return objectives of each individual client. The discussion of any investments is for illustrative purposes only and there is no assurance that the adviser will make any investments with the same or similar characteristics as any investments presented. The investments identified and described do not represent all of the investments purchased or sold for client accounts. Any representative investments discussed were selected based on a number of factors including recent company news or earnings release. The reader should not assume that an investment identified was or will be profitable. All investments contain risk and may lose value. There is no assurance that any investments identified will remain in client accounts at the time you receive this document.
Some of the material presented is based upon forward-looking statements, information and opinions, including descriptions of anticipated market changes and expectations of future activity. Strategic Financial Services believes that such statements, information, and opinions are based upon reasonable estimates and assumptions. However, forward-looking statements, information and opinions are inherently uncertain and actual events or results may differ materially from those reflected in the forward-looking statements. Therefore, undue reliance should not be placed on such forward-looking statements, information and opinions.
No content on this website is intended to provide tax or legal advice. You are advised to seek advice on these matters from separately retained professionals.
All index returns, unless otherwise noted, are presented as price returns and have been obtained from Bloomberg. Indices are unmanaged and cannot be purchased directly by investors.