Bi-Weekly Market Insights 11-14-22 Potential Market Impact of Election Results

Opinion

We will see several variables that will shape our strategy and approach to risk over the next 60-90 days.

This week is mid-term elections, and while it is a topic of much debate and discussion on main street, Wall Street traditionally does not put significance on them. However, this time might be slightly different since some significant legislation could be affected. We've gone ahead and highlighted what we think will happen based on the three possible outcomes:

All Democratic Results

Outcomes could mean a renewed interest in tax reform and the rolling back of recent Care Act provisions. We believe Wall Street will view this as a negative, causing higher rates, strengthening the US Dollar, and straining equities in the near term.

All Republican Results

Elections could mean the beginning of a bear market rally due to the implication of no new tax reform or rolling back of passed provisions.

Mixed Results

We consider we will lose nothing and gain nothing as a result which would promote the current market condition as we advance.

**Do note - if there are run-off elections, the results for the Senate may not be known until December.**

The likely Fed rate hikes are another variable that will shape our strategies. Don't fight the FED! The Fed is still fighting the inflation wildfire and plans to stay with the fight until it's over, meaning the inflation rate is coming down from 8.2% to 2% by 2025. That means 4-6 additional rate increases to squelch the fire. Last week, the belief on wall street was that rates would land around the 5-5.5% level, which would be a significant jump!

Ideally, we would see the rates above CPI for an extended period leading to inflation coming under control again. The result would see rates around 4-4.5%. Big banks are now beginning to show lower earnings estimates for 2023, which suggests they are beginning to price in a recession in 2023. Until recently, the markets were not pricing in a recession, leaving us dumbfounded.

Since we are in a "technical recession" now, defined as two consecutive quarters of declining GDP, many households are already feeling the effect of a recession. However, we believe Wall Street is waiting on higher unemployment figures to price in a "real recession" that follows historical trends. We will have to wait and see how the next 90 days go.

On unemployment, more CEOs expect to lay off employees in 2023. If that occurs, we may see Wall Street react negatively toward this for a while. We consider that until the employment data weakens significantly, the FED will not relent and relax its monetary policy. An unemployment rate of 4.5-5.5% would be healthy for the economy, but it may sound good on paper at our current levels.

We are not out of the woods yet, but we think we're closer to the end of this bear market than we are at the beginning. Remember that the needs are a 6-9 month forecast on the economy, so we will be in a position to go hunting after the markets stop worsening but before the economy begins to get better.

Year-End Contribution Reminders:

Now that it is November, remember to get your contributions in before December.

RMDs are currently being created for those who are 72 and older.

The 529 contributions are necessary for tax credits.

IRA and ROTH contributions also need to be in before December.

Make sure any of your charitable contributions are also known and processed by December to avoid not being allowed for 2022.

Office Update:

I will be undergoing a medical procedure on the 17th. I will be working but doing so on zoom meetings from the home office while I am recovering. All the office staff will be present and operating as usual so if you need anything, feel free to reach out.

Till we speak again, enjoy your week!

Jon

Hawkish comments by Fed Chair Jerome Powell, following the

announcement of another 75 basis points interest rate hike last week, cast

a pall over financial markets, sending yields higher and stocks lower.

The Dow Jones Industrial Average slipped 1.40%, while the Standard &

Poor’s 500 declined 3.35%. The Nasdaq Composite index lost 5.65% for

the week. The MSCI EAFE index, which tracks developed overseas stock

markets, fell 1.04%.1,2,3

Powell Disappoints

The official statement released following the Federal Open Market

Committee (FOMC) meeting appeared to suggest a potential for future

easing of interest rates. Investors cheered the news, sending stocks

higher. But the optimism was crushed 30 minutes later on hawkish

comments by Fed Chair Powell during his post-meeting press

conference.

Losses accelerated into Thursday, led by technology names, which were

under pressure due to rising bond yields. The yield on the two-year

Treasury note rose to its highest level since 2007. The sentiment took

damage from workforce reduction/freeze news from multiple technology

companies; some considered it a sign of a pending recession. Stocks

managed to erase some of the week’s losses on Friday following a strong

employment report and a drop in the U.S. dollar.4

From Dove to Hawk in 30 Minutes

In the statement accompanying the 75 basis point rate increase, the

FOMC said that future increases would consider the cumulative monetary

tightening to date and the lag in impact such tightening involves.5

But in his post-meeting press conference, Fed Chair Powell struck a more

hawkish tone. He said that current inflation data did not support any

slowdown in rate increases and that the terminal rate (the point at which

rates will no longer rise) may be higher than initially expected.6

This Week: Key Economic Data

Thursday: Consumer Price Index (CPI). Jobless Claims.

Friday: Consumer Sentiment.

Source: Econoday, November 4, 2022

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

Tuesday: The Walt Disney Company (DIS).

Wednesday: Roblox Corporation (RBLX), Occidental Petroleum

Corporation (OXY).

Thursday: Becton, Dickinson and Company (BDX).

Source: Zacks, November 4, 2022

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.

"If you would be loved, love and be lovable."

– Benjamin Franklin

Learn About ABLE Accounts

People with disabilities can use an Achieving a Better Life Experience

(ABLE) account to help pay qualified disability-related expenses. Here are

some things to know about ABLE accounts:

This tax-advantaged savings account doesn't affect their eligibility for government assistance programs.
The 2022 annual contribution limit is $16,000.
ABLE account-designated beneficiaries may be eligible to claim the saver's credit for a percentage of their contributions.
Eligible beneficiaries must be 18 years old at the close of the taxable year, are not dependent or full-time students, and meet the income requirements.
Families may roll over funds from a 529 plan to another family member's ABLE account.
Disability-related expenses include housing, education, transportation, health, prevention and wellness, employment training and support, assistive technology, and personal support services.

* This information is not intended to be a substitute for specific

individualized tax advice. We suggest that you discuss your specific tax

issues with a qualified tax professional.

Tip adapted from IRS.gov7

Stay Hydrated With Infused Water

Staying hydrated is essential for our overall health, and these fun,

delicious infused water options make drinking water a little more fun.

Bonus points if you try them with sparkling water for a bit of fizz!

Honeydew, cucumber, and mint
Watermelon, kiwi, and lime
Mango, raspberries, and ginger root
Blackberries, orange, and ginger root
Grapefruit, pomegranate, and mint
Pineapple, coconut, and lime
Blueberries, lemon, and rosemary
Strawberries, lemon, and basil

To infuse your water with these delicious combinations, just put all the

ingredients in a pitcher, add water, and remove the fruits, veggies, or

herbs in 24 hours. Drinking water has never been tastier or more

beautiful.

Tip adapted from Culinary Hill8

Create a 13-letter word using all 13 of the following letters: O A I I S T T R

R D N A M.

Last week’s riddle: What is worn by the foot and often bought by the

yard? Answer: Carpet.

Iguazu Falls, Argentinian National Park, Argentina.

Footnotes and Sources

1. The Wall Street Journal, November 4, 2022

2. The Wall Street Journal, November 4, 2022

3. The Wall Street Journal, November 4, 2022

4. The Wall Street Journal, November 3, 2022

5. The Wall Street Journal, November 2, 2022

6. The Wall Street Journal, November 2, 2022

7. IRS.gov, July 20, 2022

8. Culinary Hill, May 19, 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.