Monthly Newsletter - May 2022

Monthly Newsletter - May 2022

Spring has sprung and it’s hard to believe summer is fast approaching! April’s stock market was all over the board, as investors weathered the fallout from an interest rate hike and ongoing disruptions in the food and energy sectors caused in part by the Russia-Ukraine war. It was an eventful month for two notable tech companies, as Twitter accepted billionaire Elon Musk’s offer to buy the company, while Netflix shares dropped after announcing disappointing subscriber growth.

Elon Musk agrees to buy Twitter. The social media platform’s board of directors initially bristled at Musk’s takeover bid before changing their minds and accepting the tech titan’s $44 billion offer. Musk, whose frequent tweets are followed by nearly 84 million Twitter users, plans to take the company private. Critics complain that Musk’s less restrictive view on content moderation will open the door to toxic contributors, sending users running for the exits and potentially endangering advertising revenue. Proponents of the deal cite Musk’s track record of challenging conventions to improve products, an approach they feel will help Twitter remain competitive.

Netflix stock price crashes -35% in a day. Traders punished the streaming giant after the company announced the loss of 636,000 subscribers in the United States and Canada last quarter (global subscriptions were down 203,000 for the quarter). The drop represents about a -1% fall in global subscriber figures, quarter-over-quarter. Netflix also announced plans to crack down on password sharing and add a new advertising-based subscription tier in the next year or two.

Crude oil prices moderate. After spiking to nearly $125/barrel, oil prices (as measured by WTI Crude) have slipped below $100/barrel as of this writing. Gas prices have followed suit, retreating from previous highs to around $4/gallon nationally. It’s too soon to tell if this recent pullback indicates a return toward gas’s 52-week average price of $3.35/gallon. Fingers crossed!

Kickoff to next season. Georgia’s Travon Walker was the first overall pick in the annual National Football League (NFL) Draft, held in Las Vegas this year. While first-round picks generate the most buzz, the real focus should be on players selected in the middle of the second round - at least according to Richard Thaler, who won a Nobel Prize for his work in behavioral economics. Read his blog about the intersection of game theory and player selection in the NFL Draft. We’re grateful to be part of your financial coaching team. If there’s anything you need, please schedule some time with our office.

Melissa MinterMay 16, 2022

Overview

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The year began with the government stymied by a shutdown, and ended with articles of impeachment levied against the president. In between, both domestic and global economies showed signs of slowing, all while the trade war between the United States and China loomed throughout the year. Nevertheless, investors remained relatively bullish toward stocks, pushing several major indexes to record highs.

While domestic economic growth may have slowed in 2019 compared to 2018, it showed resilience and stamina. The third-quarter gross domestic product expanded at an annualized rate of 2.1% — moderately down from 2018's 3.0% rate, yet still strong enough to outpace global economic growth by a considerable margin. Consumer spending — which accounts for about two-thirds of the U.S. economy — surged, buoyed by a strong labor market, near-record unemployment, solid wage growth, and a burgeoning stock market. All told, the domestic economic expansion continued into its 11th straight year, the longest run in U.S. history.

Last year saw trade disputes between the United States and several of its trade partners reach an accord, but the trade war with China roared. The world's two largest economies engaged in a tit-for-tat skirmish, with each country volleying tariffs on their respective imports at the expense of the exporting nation. Coincidentally, a limited deal was announced just before the holiday shopping season, with the U.S. agreeing to forgo new tariffs and China assenting to allow more U.S. agricultural imports. Further negotiations are presumed, but the relationship between the economic giants remains tenuous at best.

Not only did the ongoing trade war affect global economies, but it also impacted domestic business investment, industrial production, and exports. Part of the justification cited by the Federal Reserve for lowering interest rates three times last year was weakness in business fixed investment and exports. As of November, new orders for durable goods were down 1.3% from the same period in 2018, and business (nonresidential) investment fell 2.3% in the third quarter.

The new year begins with a strong stock market and solid economic growth. The Secure Act, passed in late December, should change the retirement planning (and saving) landscape to some extent. However, the Treasury budget deficit for fiscal 2019 (October 2018-September 2019) exceeded $980 billion — 26% higher than the 2018 fiscal-year deficit. The trade war with China may cool with more mutual concessions, or accelerate, which would continue to dampen global economic growth. The new year will begin with the impeachment process and end with November's presidential election. What happens in between is anyone's guess. Will unemployment and inflation remain low? Will stocks continue to experience growth? Will oil and gas prices moderate or surge? Will the domestic economy continue to accelerate, or suffer a setback? Can the world economy recover, or will it continue to stagnate? If nothing else, 2020 looks to be an interesting year.

News

Monthly Newsletter - May 2022

Overview

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