FDP Wealth Management

08/21/2023

Treasury Yields Drift Higher

Recession talk earlier this year and a belief that the Federal Reserve was nearly finished hiking interest rates kept a lid on longer-term Treasury yields. That’s changed.

Last Thursday, the 10-year Treasury yield closed at 4.30%, according to the U.S. Treasury. It was the highest close since late 2007 (St. Louis Federal Reserve Treasury data).

But why have yields recently lurched higher?

To begin with, the Treasury Department is ramping up debt issuance. In late July, the Treasury revised its net borrowing estimate for the third quarter to $1 trillion, significantly higher than the $733 billion projected in early May, according to Bloomberg News.

Read the full analysis on our website...

Treasury Yields Drift Higher - Market Commentary 08/21/2023

08/16/2023

Read our SCCA article, College Funding Options - A Quick Primer, to learn about the various plans and strategies that can be used to save for higher education expenses!

08/14/2023

Lessons from the 1960s

Fed Chief Jay Powell, along with other Fed officials, have been open about discussing the lessons they learned and the errors made during the 1970s.

The Consumer Price Index (CPI) jumped to an annual rate of over 12% in 1974 before falling back to 5% by 1976, per data from the St. Louis Federal Reserve.

However, the Fed became complacent, and it was forced to chase a rising rate of inflation, with the CPI hitting nearly 15% by 1980.

But what about the lessons of the 1960s? And how might they relate to our current situation?

Read the full analysis on our website...

Lessons from the 1960s - Market Commentary 08/14/2023

08/07/2023

Fitch Strips USA of Triple-A Credit Rating

Fitch Ratings downgraded U.S. government debt last week by one notch from its prized top rating of ‘AAA’ to ‘AA+.’ Fitch said its decision “reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden,” and repeated political brinkmanship surrounding the debt ceiling debates.

The decision didn’t come as a surprise since Fitch had warned in May, when lawmakers were battling over the nation’s debt ceiling, that the ‘AAA’ rating was under the microscope.

U.S. debt was last downgraded in 2011 when Standard & Poor’s cut its triple-A rating to ‘AA+.’ Only Moody’s maintains its triple-A rating on U.S. debt.

To some extent, it’s difficult to completely disregard the reasoning behind the downgrade. The federal deficit as a percent of Gross Domestic Product (GDP) has more than tripled over the last 40 years.

Read the full analysis on our website:

Fitch Strips USA of Triple-A Credit Rating - Market Commentary 08/07/2023

07/31/2023

Defying Expectations

Gross Domestic Product (GDP) is a very broad measure of the value of goods and services in the economy over a certain period.

Last week, the U.S. Bureau of Economic Analysis reported that GDP rose at an annual pace of 2.4% in Q2, accelerating from Q1’s 2.0% and topping the forecast of 2.0% (Wall Street Journal).

Sometimes, we analyze the quarterly change and find that one-off factors aided or detracted from the headline number. This time, however, that was not the case.

Read the full analysis on our website...

Defying Expectations - Market Commentary 07/31/2023

07/26/2023

Read our SCCA article to learn more about the emerging, new generation of investors who are concerned with more than just the industry in which a company operates. In this article, Mark discusses the values of socially responsible investing, who decides what companies are "Good", and how investing in these socially responsible companies can affect overall profit.

07/24/2023

This Year's Surprising Market Rally

The S&P 500 Index is up 18.15% since the end of last year. It has advanced 26.82% since bottoming on October 12, 2022 (through 7/21/23; data St. Louis Fed, MarketWatch). Both metrics exclude dividends reinvested.

The S&P 500 Index covers about 80% of available market capitalization, per S&P DJ Indices.

The index includes firms from all the major economic sectors, but it is a market-cap-weighted system, leading to the larger firms having a more significant impact on the index.

According to S&P Dow Jones Indices, the top ten stocks in the index account for 30% of the S&P 500. Earlier in the year, the top seven stocks in the S&P 500 by market capitalization, including Microsoft (MSFT), Amazon (AMZN), Nvidia (NVDA), and Meta Platforms (META, Facebook), accounted for a big share of the advance.

Read the full analysis on our website: https://fdpwm.com/site/this-years-surprising-market-rally/

04/04/2023

BANK FAILURES - THEN AND NOW
Recent bank failures, although large, are isolated.

In 2008 - 25 banks failed, totaling $374B in assets.
> Washington Mutual was the largest bank failure in history, with $307B in assets

In 2023 - 2 banks have failed, totaling $319B in assets.
> Silicon Valley Bank ranks as #2 in history, with $209B in assets
> Signature Bank had $110B

WHAT'S DIFFERENT?
This time banks don't have a massive inventory of sub-prime mortgages and mortgage-backed securities - the "contagion" that spread throughout the banking system in 2008.

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