Michael McCormick

5 West Mendenhall, Ste 202 | Bozeman, MT 59715

406.920.1682  mike@mccormickfinancialadvisors.com

Sustainable Income Planning | Investments | Retirement

From a plataeu it's hard to see very far ahead.
Market Update
(all values as of 04.30.2024)

Stock Indices:

Dow Jones 37,815
S&P 500 5,035
Nasdaq 15,657

Bond Sector Yields:

2 Yr Treasury 5.04%
10 Yr Treasury 4.69%
10 Yr Municipal 2.80%
High Yield 7.99%

YTD Market Returns:

Dow Jones 0.34%
S&P 500 5.57%
Nasdaq 4.31%
MSCI-Europe 2.05%
MSCI-Pacific 1.82%
MSCI-Emg Mkt 2.17%
US Agg Bond 0.50%
US Corp Bond 0.56%
US Gov’t Bond 0.48%

Commodity Prices:

Gold 2,297
Silver 26.58
Oil (WTI) 81.13


Dollar / Euro 1.07
Dollar / Pound 1.25
Yen / Dollar 156.66
Canadian /Dollar 0.79

Dear Friends,

The US economy has yet to present a problem that capitalism has not solved.

Most everyone thought we would be in a recession by now as punishment for our excessive pandemic spending.  Instead, wages continue to rise and demand for everything is keeping prices high.  Expansionary economic policies and subsequent indebtedness of the USA of the past decade have yet to cause a problem and the S&P500 has returned 10% in the last 12 months as of this writing.  It seems we are climbing a plateau, but cannot see beyond.  The frenzy of growth is dissipating and people are looking more closely at how much risk they want to carry going forward.

We are proceeding cautiously now and investing in mostly safe things.  It’s not because of any fear of the future.  Prudent investors are not fearful.   And it is important to be cognecent that as time passes, so do opportunities.

Most significantly, long term rates have increased to as high as 4.8% for the 10 year treasury.  Many portfolios have felt the impact of this as significant losses in their bond funds, supposedly the safe part.  Diversification can be a real pain sometimes!

Recently some important investing behaviors appear to be changing: borrowers are getting pinched as their rates become reset and simultaneously investors can make 5% risk-free in a CD (That is about 20 times what it was only 2 years ago!).  Money is now expensive.  “The effects will come; just wait. In the first year of the pandemic, many borrowers locked in low-cost funding for many years, effectively delaying any day of reckoning. ” (WSJ).  Perhaps

This newsletter has a cautious bent.  Worry some numbers are appearing on housing, mortgages, and our reliance on revolving credit.  Things that used to work no longer do.  We see investment opportunities shifting and are taking incremental action and seizing opportunities to enhance the security of our client portfolios.  Persisting with our continued faith in the US economy means that whatever the Fall brings, there will be a Santa Claus rally.  Us, the consumer, will make sure it does!  The economy has yet to present a problem that capitalism has not solved.


Unclear where the top is.

30-year mortgage rates reached 7.23% in august

Consumer Rates Remain Elevated – Fixed Income Overview

Interest rates experienced some volatility in August due to uncertainty surrounding inflationary pressures and intended Fed policy. Elevated rates on consumer loans such as credit cards and mortgages continued to place pressure on shoppers and home buyers.

The yield on the 10-year Treasury bond closed the month at 4.09% after reaching 4.34% in August. The average rate on a fixed 30-year mortgage fell to 7.18% in late August, down from 7.23% earlier in the month. Rates this same time a year ago averaged 5.66% on a 30-year fixed mortgage. Some analysts believe that rates may have started to change course, as the Fed ponders holding back from further rate increases. (Sources: U.S. Treasury. Federal Reserve)

Pullback In August Affects Equity Indices – Domestic & International Equity Update

Domestic stocks experienced a retraction in August as future earnings came into focus along with lingering inflationary pressures on company expenses. The S&P 500 fell -1.6%, culminating in the second monthly decline so far in 2023. The Dow Jones Industrial Index as well as the Nasdaq declined with similar pullbacks. September has historically been a volatile month for the indices as uncertainty before the year end and government fiscal mayhem have hindered equity performance.

Energy was the only sector of eleven sectors in the S&P 500 Index that was positive for August. Such broad pullbacks in multiple sectors are closely watched by analysts as an indication of a possible broadening of market weakness.

International and emerging market equities saw a more substantial pullback in August, with the developed market MSCI EAFE Index retracking -4.1% and the emerging market MSCI EMG MKT Index declining -6.36%. Currency volatility in addition to global expansion concerns fueled the overseas markets. (Sources: Dow Jones, S&P, Nasdaq, Bloomberg, MSCI)

Producer Prices Heading Lower, What It Means – Producer Inflation

The Producer Price Index (PPI) measures the selling prices domestic companies receive when purchasing everything from raw materials to products themselves. Similar to how the Consumer Price Index (CPI) tracks prices consumers pay for goods, the PPI tracks prices that corporations pay.

With the PPI steadily decreasing to its lowest growth rate since 2020, corporations are now forced to pay far less for commodities than previously. This affects companies across a wide variety of industries and is a leading indicator of what may soon trickle down to CPI. With companies paying lower prices, consumer prices have historically followed and continue their downward path as has been exemplified in recent months.

Sources: U.S. Bureau of Labor Statistics, Federal Reserve Bank of St. Louis


30-year mortgage rates fell to 2.65% in 2021, the lowest in history

Housing Market Is Among The Least Affordable In U.S. History – Housing Market

Measured by the Housing Affordability Index, the affordability of homes has been steadily eroding since early 2021. Factors affecting affordability include home prices, mortgage rates, and household incomes. With historic inflation outpacing income growth, home buyers in the U.S. have been unable to keep up with rising prices and mortgage rates.

When the Fed increases interest rates to combat inflation, mortgage rates are similarly affected. The average 30-year mortgage rate rose to a high of 7.24%, the highest since 2001. This is a significant difference to the lows reached in 2021 when the average 30-year mortgage fell to 2.65% mortgages, the lowest in U.S. history. This creates a less affordable environment for home buyers and harms potential buyers’ abilities to acquire property.

First-time buyers are forced to either buy a home knowing they may not be able to afford it or continue renting until affordability rises. For those who already own a home, remaining in their current house instead of buying a new one has been increasing in popularity as well. (Sources: National Association of Realtors, Federal Reserve Bank of St. Louis, Freddie Mac)

How Deflation & Inflation Affect High Income & Low Income Earners – Inflation Review

As inflation has taken center stage over the past year, consumers among all demographics have been affected in various ways. Consumers know inflation as the overall increase in the cost of goods and services, from shoes to gasoline. However, products that are essential for everyday life can be more costly for some than others, such as food, healthcare, and toilet paper. These products usually make up a larger portion of expenses for lower-income consumers and less for higher-income earners. In essence, inflation can be much more of a challenge for lower-income earners as less disposable income is left for more desirable items.

Fortunately, consumers have the ability to control what they buy when inflation sets in, such as buying hamburgers instead of steak. This is where consumer choice is critical as to where the economy is heading and what companies might benefit more than others.

As the economy slows and lower prices eventually settle in, a deflationary environment evolves pulling certain asset prices down. Historically, lower asset prices affect higher income earners with assets, rather than those with little or no assets. Deflation may affect the prices of assets such as homes, cars, stocks, and commodities.(Sources: U.S. Bureau of Labor Statistics, OneBlueWindow Editorial Staff)


credit card delinquency rates reached their highest level in over a decade