W.P. "Bill" Atkinson, III

Certified Financial Planner TM / Attorney

Access Financial Resources, Inc.

3621 NW 63rd Street, Suite A1

Oklahoma City, OK  73116

(405) 848-9826

www.afradvice.com / bill@apaplans.com

April 2022
Market Update
(all values as of 07.29.2022)

Stock Indices:

Dow Jones 32,845
S&P 500 4,130
Nasdaq 12,390

Bond Sector Yields:

2 Yr Treasury 2.89%
10 Yr Treasury 2.67%
10 Yr Municipal 2.27%
High Yield 7.50%

YTD Market Returns:

Dow Jones -9.61%
S&P 500 -13.34%
Nasdaq -20.80%
MSCI-EAFE -17.07%
MSCI-Europe -18.52%
MSCI-Pacific -14.20%
MSCI-Emg Mkt -19.34%
 
US Agg Bond -8.16%
US Corp Bond -11.61%
US Gov’t Bond -9.13%

Commodity Prices:

Gold 1,782
Silver 20.32
Oil (WTI) 98.35

Currencies:

Dollar / Euro 1.01
Dollar / Pound 1.21
Yen / Dollar 135.01
Canadian /Dollar 0.77

Macro Overview

The Russia-Ukraine war has intensified inflation expectations due to the threat of global supply chains, which are expected to be impaired for an extended period of time. Supply chain issues were already wreaking havoc on global manufacturing, production costs, and consumer availability before the Russian invasion started.

Because of unprecedented money printing, consumers are rapidly losing purchasing power as rising rates have created higher borrowing costs for homebuyers and consumers overall. Quickly elevating mortgage rates have some borrowers being disqualified on mortgage loans that had previously been approved.

The Federal Reserve initiated its long-awaited rate increase in March, making its first of several additional increases projected this year. The Fed’s objective is to circumvent inflationary pressures by raising rates in order to ease consumer demand for products and services. However, if that is their objective, then real rates need to be higher than the rate of inflation.  Consumer loan rates, mortgage rates, and auto loan rates all increased.  To be sure, the tremendous spike in global commodity prices increases costs for production, manufacturing, and consumers globally.

The pandemic-induced demand for homes nationwide may eventually subside as mortgage rates have reduced affordability for millions of homebuyers. The average 30-year conforming mortgage rate rose to 4.67% in March, up from a low of 2.66% in December 2020.

Short-term Treasury bond yields began to move higher than some long-term Treasury bond yields, viewed as an indication of a possible economic slowdown. Rising short-term rates may signal inflationary pressures, while lower long-term rates may suggest a recessionary environment sometime in the future.

A strengthening U.S. dollar over the past few weeks has been the result of global investors seeking stability as the Russian invasion of Ukraine has progressed. Optimistically, a stronger dollar can help stem inflation as it can make imported products less costly for American consumers – this is most likely a short-term impact. The most recent inflation data revealed a 7.9% annual rate, the highest in 40 years, putting pressure on consumers as wages struggle to keep pace with heightened inflation.

Gasoline prices have soared more in certain states than others, with excise gasoline taxes as a culprit. The federal government imposes a tax of 18.4 cents for each gallon sold nationally, yet some states impose an additional gas tax in order to raise funds for state infrastructure and highway projects. Even though the average cost of a gallon of regular gasoline nationally was $4.23 at the end of March, several states saw much higher prices due to additionally imposed excise taxes. (Sources: EIA, Federal Reserve, FreddieMac, U.S. Treasury)

 
Equities Overview and Interest Expense

Stocks Have A Tough First Quarter – Equity Overview

The yield on the 10-year Treasury bond rose above the S&P 500 Index yield in March, meaning that the 2.32% yield on the 10 year Treasury bond is more than the 1.32% dividend yield for the S&P 500 Equity Index. Some analysts believe that current earnings estimates for the S&P 500 Index, which represents a wide swath of the equities market, may be distorted. Almost all of the growth in 2022 earnings for the index since the beginning of the year can be traced to the energy sector alone.

Major equity indices recouped some ground in March, with the S&P 500 Index, Dow Jones Industrial Average, and the Nasdaq all having a positive month. First-quarter returns were not as generous, as all three indices saw negative performance with the worst quarter in two years. Some analysts are skeptical if an upward trajectory will continue, while others see fundamental optimism surrounding earnings and economic growth, both of which affect stock prices. (Sources: S&P, Treasury, Dow Jones, Nasdaq)

Rates On The Rise – Fixed Income Overview

Global bond yields rose in March, which means global bond prices were down, as European and Asian central banks concurrently raised rates to help stifle global inflation. The Fed began to raise rates in March, with its first of perhaps six additional increases this year. Even though the increases are minimal, each increase affects the overall bond market. Treasury and corporate bond yields rose following the Fed’s move, with the anticipation of a continued higher rate environment

towards the end of the year.

Shorter-term Treasury bonds have begun to yield more than some longer-term Treasury bond maturities. Known as an inversion, economists and bond analysts view such a dynamic as indicative of a recessionary environment sometime in the future. But how high can U.S. rates go? According to the Committee for a Responsible Federal Budget: “Higher interest rates will mean higher interest payments and deficits. For example, if interest rates were one percentage point higher than projected for all of 2021, interest costs would total $530 billion — more than the cost of Medicaid. If rates were two percentage points higher, interest costs would total $750 billion, which is more than the federal government spends on defense or Medicare. And at three percentage points higher, interest costs would total $975 billion — almost as much as is spent on Social Security benefits. On a per-household basis, a one percentage point increase in the interest rate would increase costs by $1,805, to $4,210.” SO, there seems to be a short ceiling as to how high rates can go. (Sources: Treasury, Federal Reserve, How High Are Federal Interest Payments? | Committee for a Responsible Federal Budget, 2022)

 

 
21.5% of the Consumer Price Index is composed of food and energy expenditures

Food & Gasoline Making Up More Of Consumer Expenditures – Consumer Inflation

Food and energy have become the two fastest rising expenses for consumers nationwide, as well as representing a larger proportion of total living costs. Currently, 21.5% of the Consumer Price Index (CPI) is composed of food and energy expenditures, where the cost of groceries alone was 6.5% higher and the price of gasoline 50.8% higher than a year ago.

The concern that many economists have identified is that as millions of Americans are spending more on food and energy, they have less to spend on what they’d truly desire or want, also known as discretionary goods. As funds for discretionary items become scarce, economic growth suffers as sales of cars, furniture, clothing, and dining out become less affordable for millions of consumers.

Historically, food and energy prices have always been very volatile, making up more or less of consumer expenditures over time. Where consumers live and how old they also dictate how influential components of the CPI are. Gasoline for example is less expensive in Oklahoma than in California, and seniors may not spend any funds on education but may spend more on medical expenses. (Sources: Dept. of Labor, BLS)

What Is Stagflation – Inflation Overview

Becoming more of a topic throughout the financial media is stagflation, characterized as an environment with minimal economic growth, inflation, and elevated unemployment. The last time the U.S. experienced stagflation was in the late 1970s and early 1980s, with only a small portion of consumers remembering what it was like. According to the Mise Institute, “the essence of inflation is not a general rise in prices but an increase in the supply of money, which in turns sets in motion a general increase in the prices of goods and services.” And, “because the prices of goods are rising faster than those of services, profit margins are narrowing, in turn discouraging production in some areas and contributing to stagflation.“(Source: Federal Reserve Bank of Kansas City, Kanopiadmin. (2002, March 6). Defining inflation: Frank Shostak. Mises Institute. Retrieved April 6, 2022, from https://mises.org/library/defining-inflation, Ryan. (2022, February 5). Death by inflation or by interest rate hikes?: Daniel Fernández Méndez. Mises Institute. Retrieved April 6, 2022, from https://mises.org/wire/death-inflation-or-interest-rate-hikes)

 
Home Title Lien Alerts from the Oklahoma County Clerk

Home Title Lien Alerts from the Oklahoma County Clerk

If you are concerned about home title fraud, then the Oklahoma County Clerk offers a free alert.  The Oklahoma County Clerk’s Lien Alert System will provide you with an automated alert whenever any document affecting the registered account is filed in their office. Of course, such alerts are after the fact – so it does not prevent a lien or conveyance, but registered accounts will receive a notification if a document is recorded in the County Clerk’s office matching the registered property. Note that common names may trigger an alert that may not actually be yours. If you receive a recording notification and it is not a document you have prior knowledge of, then contact the Oklahoma County Clerk’s office at landrecords@oklahomacounty.org.

To register Oklahoma County properties, go to: https://alert.okcc.online/. You can select one of the following options: Text/SMS Notification – to receive a text message to your mobile device for every filing alert. Text messages have a link to the filed document for easy review. Email Notification –  to receive an email alert for every filing on a registered property. Emails have a link to the OKCC.online web page where you can review the filed document. And, Automated Telephone Notification – to receive an automated telephone call to alert you of filed documents. For Cleveland County properties, go to their main site (https://clevelandcountyok.com/130/County-Clerk) and click the FRAUD GUARD link. (Source: Oklahoma County Clerk)

Newsletter Disclosures

*Market Returns: All data is indicative of total return which includes capital gain/loss and reinvested dividends for the noted period. Index data sources; MSCI, DJ-UBSCI, WTI, IDC, S&P. The information provided is believed to be reliable, but its accuracy or completeness is not warranted. This material is not intended as an offer or solicitation for the purchase or sale of any stock, bond, mutual fund, or any other financial instrument. The views and strategies discussed herein may not be appropriate and/or suitable for all investors. This material is meant solely for informational purposes and is not intended to suffice as any type of accounting, legal, tax, or estate planning advice. Any and all forecasts mentioned are for illustrative purposes only and should not be interpreted as investment recommendations. This market update is a publication of Access Financial Resources. It should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author on the date of publication and are subject to change. Newsletter content was prepared by a third-party provider, which is modified in some of its parts by the adviser. Charts and graphs do not represent the performance of Access Financial Resources or any of its advisory clients. Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment management fee, the occurrence of which would have the effect of decreasing historical performance results. There can be no assurances that an investor’s portfolio will match or outperform any particular benchmark. Access Financial Resources is registered as an investment adviser and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser does not constitute an endorsement of the firm by securities regulators nor does it indicate that the adviser has attained a particular level of skill or ability. Past performance may not be indicative of future results. Indexes are not available for direct investment. All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.