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02.9.2024 by Gerrit Petersons

Strong Labor Market Means FED May Hold Higher for Longer

Friday’s U.S. jobs report was another strong one, with employment rising 350,000 in January, better than analysts’ estimates of 185,000. November and December payroll numbers also received upward revisions, bolstering the labor report. With the U.S. economy experiencing GDP growth, slowing inflation, and continued strong payroll numbers, it is unlikely the Federal Reserve will move to cut interest rates and will continue to hold policy rates steady until economic data begins to deteriorate. US Jobs Report January 2024 | Bloomberg Jobs report January 2023 |

The bond market reacted to the good news and the 10 Year U.S. Treasury rate increased, rising above 4.0%:

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Fantastic Four: I heard someone recently refer to the ‘Magnificent 7’, the seven stocks that drove the U.S. stock market in 2023, as the Mag 7, I think in an effort to further enhance our society’s vernacular. So far in 2024, the seven stocks (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) have produced mixed results, with 4 of the 7 contributing to 75% of 2024’s stock market gain in 2024. ('Magnificent 7' in early 2024 | So that got me thinking that I need to get in front of this nickname for these 4 stocks and I ended up with the ‘Quad Squad.’

Leading the ‘Quad Squad’ last Friday was Meta stock, posting the biggest one-day market capitalization gain in history after it announced share buybacks and its first ever dividend, sending the stock up 20% in one day. Meta Surges | Reuters. Amazon also posted strong results and rose 7%. AMZN Stock Soars | Bloomberg. Overall, with the mixed results of the Mag 7 so far in 2024, analysts say that delivering strong earnings will be key to any future stock growth. So far, Meta and Amazon have delivered. Big Tech Stocks Have High Bar for Gains in 2024 | Bloomberg

Financial Planning Corner

Credit Card Balances Increase: Taken at face value, the headline and chart are concerning: Credit card balances jump to new $1.13 trillion record at end of 2023.

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While higher balances are a concern, it’s important to consider the data you are looking at and how it is presented. Charts that present growth over time will typically point to something being larger, but that will likely be tied to economic growth and inflation. Listeners to our annual call with Fritz Meyer (recording here and access with password: RobinsonSmithWealth) may recall Fritz looking at current household debt service payments as a percent of disposable personal income and how low it is compared to previous time periods:

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So that’s the good news on credit card debt. The bad news is that it is trending higher, typically for younger cohorts. Delinquencies, or late payments, are also increasing. With higher interest rates, the average annual percentage rate for a credit card is over 20%, meaning carrying a credit card balance every month would result in significant interest charges. If individuals can pay down debt, it’s typically best to target debt with the highest interest rate first, even if it may not be your highest debt balance, because you may be incurring more interest rate charges.

The Internet is Full of Junk: In the same vein of when my parents would tell me there was nothing good on TV and to go outside, this article spoke to me: The Internet Is Being Ruined by Bloated Junk | The Atlantic. It’s not that the content is bad, it’s that content creators are incentivized and rewarded for creating long, meandering, pointless content (RSWA’s weekly newsletter obviously excluded). Shock videos are created with cliffhangers to force you to watch the next video, padding view counts. I personally refuse to use internet blogs for recipes now because I somehow learn more about the blogger and their excursions into “Vanlife” than I do about the marinade I was looking for. Podcasts are running three or four hours long. I read ‘Killers of the Flower Moon’ but was turned off by the length of the movie, nearly 3.5 hours. The Economist Magazine analyzed films since the 1930s and the 10 most popular movies are now 50% longer than then: Why films have become so ridiculously long. It is just hard to concentrate on something for that long. My wife thinks I should just give up, sit down and watch. I just go back to the old quote: “If I had more time, I would have written a shorter letter.”

Quick Hits:

Quote: “Brevity is the soul of wit” – William Shakespeare

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