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May 2023 Newsletter - The Fed, The Dollar, Earning Season

The Fed, The Dollar, Earning Season 

Uniquely Waterstone for our unique Waterstone clients 

In this Issue: The Fed has inflation and mini-bank traumas 

  • Market recap - same story 
  • The weakening dollar 
  • Tactical strategies vs traditional 60/40 portfolios 
  • A peek at QTR 1 earnings 
  • Video: The Big Picture of the Big Topics 
  • The anatomy of a good apology - Time Magazine 
  • Art! Perinton Quilt Guild Show/Sisters in Stitching - May 6 

Same recap for the year: 

  • We wait for the Federal Reserve to raise rates enough to cool sticky inflation. The mini-bank crisis adds another task to the Fed’s plate. 
  • We watch jobs for continued strength or softening. Manufacturing looks droopy. 
  • Earnings show signs of strength in some sectors, cracks in others and slowing happening elsewhere. 
  • Company balance sheets and earnings now matter. 

A new factor is the weakening dollar. 

A lower dollar makes US products more affordable abroad which is good for earnings. A lower dollar makes foreign goods less affordable to US consumers who spend. It adds to inflation and detracts from earnings. 

Saudi Arabia and China would like to boost their influence in the world by inserting their currencies as the core currencies of exchange. Saudis would like the riyal as the currency of oil. 

The Chinese would like the yuan as the currency for oil with Russia as well as other key international goods. 

The US dollar has been most solid and dependable in the past and will likely/hopefully continue in the future. But these efforts will add confusion and add to Geopolitical risk considerations. 

Okay, again: Our investment partners navigate on our behalf.

Our Tactical strategists (flexible, adaptive, dynamic) hold a few very targeted equities and mostly short term bonds of various ilk. Connect by office visit, phone or zoom. Knowledge is the antidote to fear….Emerson 

Reminder of why we use Tactical Strategists vs the Traditional 60/40 Portfolio. 

The 60% allocation to stocks is intended to provide capital appreciation while the 40% holding of bonds acts as a safety value for stock risk. For it to work, ideally the correlation between the two asset classes should be negative and bond volatility should be low – or at least lower than stocks. The basic idea: when stocks go down, bonds go up. 

Holding 60% of portfolios in stocks and 40% in bonds didn’t work in in 2022 as interest rates started to rise. Rising rates caused bonds to go down and stocks to go down resulting in negative stocks AND bond markets. The Federal Reserve has more rising rates in their plans. How much more depends on the impact and the outcome. We will only know as it unfolds. 

As this picture started to take shape in 2018, tactical strategists working Big Data came to the forefront as an alternative to 60/40 strategy. It made sense then and it still makes sense now as we walk through our lives in this changing environment. 

Again, connect for a discussion about your portfolio. 

A Peek at Qtr 1 Earnings per Zacks 

Earning Season: Per Zacks, an investment research group, estimates for the period have been coming down over the last few months, with 14 of the 16 Zacks sectors suffering negative revisions since the start of the quarter. 

This is enough to let us know the economy rethinks the role of each industry vs manic market. 

AssetMark Big Picture Update

Christian Chan, CIO of AssetMark talks about the status of the mini-bank crisis and the looming debt ceiling. 

Click here for 2 minute Update: The Big Picture of the Big Topics (May 2023). Look to "unmute" at the upper left. 

More on Apology from Time Magazine

Somehow Apology is a topic in the news. Last month we found a structured approach to the apology for family interaction. (Best suggestion for communicating with melt down children: What do you need...Help? To be Heard? A Hug? 

Today’s article is at the adult level. Key words for adults: Regret, Responsibility, Repair, Ready. A return apology to a melt down teen goes a long way. 

Time Mag offers 5 Ways to Craft the Perfect Apology, April 27, 2023, pg 18 hosted on our website blog. 

Click here for Psychology Today's How to Craft the Perfect Apology, an easier version of the above article. 

In today's stressful world, let us be an example of kindness. 

Perinton Quilt Show- Sisters in Stitching at the Perinton Rec Center (Turk Hill Rd) May 6 from 9 am to 4pm. 

This is local fine art on display. It’s back after the Covid Confusion. Take your friends and/or young folks for a wander and consider textile art as a distinct medium. 

This is a delight from many perspectives. 

Kathy will next be in the office June 12 to July 2. 

Come for a portfolio review or a visit. You can always reach out by phone. Cheers to Josh who is local, available and always appreciated. Hope to connect soon. 

In the meantime, Lucky Roth's enjoy another year at Derby Week with family. If the Kentucky Derby is on your bucket list, reach out and we'll share how to Derby like the locals to save money and lessen crowds. There's the 502's Day (Tuesday- 502 is the Louisville area code) and the Thurby (The locals Derby Day on Thursday). There are tips that destress this world class experience and increase the pleasure. We're glad to share ideas with you and yours.

Thanks if you've read to the end. You're our kind of people.
Reach out to us with your questions, comments, needs. 

Securities offered through American Portfolios Financial Services, Inc.(APFS) Member FINRA /SIPC. Investment Advisory Services offered through American Portfolios Advisors, Inc. (APA), an SEC Registered Investment Advisor. Waterstone Financial Services is not affiliated with APFS and APA. 

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