Dear valued client,
After increasing roughly 5% in the month of July, markets continued their upward trend in the first week of August (especially the tech sector) after digesting encouraging corporate earnings reports and economic news.
Among the leaders for the week were Moderna, up a significant 16%; PayPal, advancing 9.3%; computer security firm Norton rising 7.9%; and Microchip Technology gaining 5.7%. On a broader scale, investors appear to be shifting funds away from value holdings (usually blue-chip companies that investors turn to as a safe haven in more turbulent economic times) and cyclical holdings toward growth holdings. This is a bullish sign for the market as the big players are indicating we’ve hit the bottom and that we’re on our way up.
The Federal Reserve is taking a scheduled break from its duties in the month of August, which means no rate hikes this month. It will resume deliberations on the economy in September. The general consensus is that the Fed will continue quantitative tightening (raising rates) through the end of 2022, and commence quantitative easing (lowering rates) in 2023. They will have their eyes on numerous economic data including inflation, energy prices, the housing market, and unemployment figures.
Speaking of unemployment figures, the U.S. economy added 528,000 new jobs this month. This is despite the fact that the U.S. is technically in a recession. The technical definition of a recession is two or more quarters of negative economic growth. The first quarter of 2022 saw a GDP contraction of -1.6%, and -0.9% in the second. This can largely be blamed on suffocated supply chains and inflation. This is not a typical type of recession in the sense that the negative growth was experienced against a backdrop of a fairly robust economy.
During my time in Italy, I came across a book entitled, “How to Think Like Leonardo da Vinci,” by Daniel Smith. The Florentine Renaissance genius had an interesting life, not least considering he was born an illegitimate son of a notary and a woman of lowly social standing. He also had quite interesting things to say. I came across this quote from one of his many notebooks, pertaining to money.
It reads, “That is not riches which may be lost; virtue is our true good and the true reward of its possessor. That cannot be lost; that never deserts us, but when life leaves us. As to property and external riches, hold them with trembling; they often leave their possessors in contempt, and mocked at for having lost them.” My elaborated interpretation of this was that if you have the proper attitude, and embody the spirit of generosity and reciprocity, external riches will gravitate towards you. If you pursue riches for riches’ sake, it will surely slip through your fingers. Virtue, and what it garners as a result, is timeless. External riches, on the other hand, are temporary.
Have a terrific weekend,
PW
