Monthly Updates – Baker Asset Management, LLC

Monthly Update – August 2021

Fun Facts about August

Birthstone: Agate or onyx
Flower: Gladiolus or Poppy
Zodiac signs: Leo and Virgo
August was named after the first emperor of Rome, Augustus. The month was previously called Sextilis (Latin for sixth). It became the eight month after January and February were added to the calendar.
August is the last of the summer months in the Northern Hemisphere. Its Southern Hemisphere equivalent is February.
Many cultures refer to August as the harvest month.

Stocks moved higher for a sixth month in a row. The S&P 500 moved up a little over 2.4% and is now up an impressive 17% for the year. The economy continues to expand as the world fights back against covid-19. Supply chains, while still having issues, are slowly getting up to speed to meet the pent-up demand. The pandemic is back on the front page as cases and hospitalizations are rising at a pretty good clip, with almost all attributed to the unvaccinated. This is already causing many areas to revert back to more restrictive pandemic policies and could be a pretty big speed bump for our recovering economy.

We are entering the dog days of summer, which is typically a very quiet time for stocks. However, the infrastructure bill is in play the first week of August and could cause some volatility.

Take a look at the Outlook section below to see what events could move the markets over the short term.

Bond prices moved confidently higher in July as the Federal Reserve eased investors’ fears of rising inflation. This price move is going against what most investors, including myself, expect as the economy heats up. The Fed has its members out there pushing that inflation is temporary and that they have the situation under control. Investors seem to be listening based on the current upward trend in bond prices. I continue to believe that bond prices will be lower at the end of the year versus today due to the economy returning to a more normal state. Although, I am becoming more skeptical now because I didn’t expect so many people wouldn’t get vaccinated.

The 10-year US Treasury note is now yielding 1.23% and the 30-year bond is at 1.91%, both noticeably lower from last month. These rates have taken a pause in going up in the last three months but it’s a good bet that they’ll resume their upward trajectory shortly. However, if the current inflation that we are seeing goes away, these rates may be stuck down here for a while.

Interest rates moved a bit higher on the long end of the curve but were mostly flat once again in July. CD, money market, and savings account rates are still historically low. These rates should move higher over the rest of the year, but the savings rates will most likely still be too low to keep up with inflation.

Currently, the average savings account is paying 0.27%, exactly the same as last 2 months. Although safe from market fluctuations, putting all your eggs in a savings account is not the best bet, especially if you need to grow your account value. Plus, you have to pay taxes on that interest.

The 1-year CD interest rate is now averaging 0.51%, the same as last 2 months as well. The 5-year CD rate inched higher finally, all the way up to 0.72%, from 0.69%. It’s not much but at least it is moving in the right direction.

Mortgage rates broke their 1-month streak of going up and headed back down in July. Currently, the 30-year rate sits at 3.02%, compared to 3.33% last month. Rates continue to remain incredibly low, which is great news for home buyers, real estate investors and refinancers. Demand for new homes seems to be waning a little bit as prices continue to soar. Once builders use up all of that expensive lumber that they bought, prices should start to drop a little. This, coupled with lower mortgage rates should keep it a seller’s market in the housing sector.

Oil prices were pretty volatile in July but by the end of the month had moved only about $0.20 higher, continuing their streak of higher prices to a fourth straight month. The price for a barrel of oil settled at $73.95.

The sharp rise in prices was halted mostly due to OPEC agreeing to increase supply starting in August. Also, travelers have started to hit the brakes as the covid variants are spreading across the U.S. Many airline routes have been canceled and more people are looking at staycations once again.

Gasoline prices crept higher yet again this past month. The increased oil production in August should slow the rise in gas prices as it starts to flow through the system. Prices at the pump are averaging about $3.18 per gallon, about 7 cents higher than a month ago. Mississippi has the cheapest gas right now, at $2.79. California has the most expensive at $4.38 per gallon. FYI, a year ago, we were paying $2.18.

Check out the prices at the pump in your area: Gas Buddy.

Outlook

Events on the horizon that could move the markets in the near term:

Infrastructure Bill: The bill passed in the House of Representatives at the beginning of July and is currently close to a deal in the Senate. If the Senate doesn’t vote on it before August 7^th, we’ll have to wait until September because they will be off the rest of August (good gig if you can get it). I believe much of this bill is already priced into the market but headlines of Biden signing it into law would probably still give the markets a little boost.
Coronavirus: There was very little progress in getting more people vaccinated in July in the U.S. Only about 3% more have received at least 1 dose, up from 54% at the end of June. This is definitely going to prolong the pandemic and get it back into front page news, which we are already starting to see. Looking at some charts, positive covid cases are definitely trending back up but fatal cases have not seen the same rate of increase. This is certainly good news. Improved treatments are a big factor in keeping deaths down and being vaccinated helps big-time if you do catch covid. If the FDA gives full approval of the vaccines (versus emergency approval), it may sway some of the unvaccinated to get the shots. Improved vaccination numbers would give the markets a nice pop, especially during the historically treacherous fall season for the markets.
Fed & Inflation: The Fed just met this past week and are still in the temporary camp regarding inflation. Some prices have been dropping or not rising as fast, such as lumber and gasoline. But some metals prices, such as copper and steel, continue to rise. So, the Fed is still in a wait and see stance, but they are optimistic that prices will slow their rise and eventually flatten out.

Joe Baker, CFP®

Baker Asset Management, LLC

joebaker@bakerassetmanagement.com

Monthly Update – June 2021

Fun Facts about June

Birthstone: Emerald
Flower: Rose and the Honeysuckle
Zodiac signs: Gemini and Cancer
June is derived from Juno, the goddess of marriage.
June is the month with the longest daylight hours of the year in the Northern Hemisphere, and conversely, June has the shortest daylight hours of the year in the Southern Hemisphere.

Stocks moved higher for a fourth month in a row. It wasn’t much but it still counts. The S&P 500 eked out a gain of just 0.65% in May and is now up 12.3% for the year. Signs of life getting back to normal are everywhere here in the U.S. Watching the NBA and NHL playoffs with packed stadiums is so much better than not hearing any fan noise. Walking into stores and restaurants without a mask is one less thing to remember before getting there and it’s great to see employees, servers, and bartenders without masks.

Supply is still trying to catch up with demand in most sectors of the economy. This has caused prices for raw materials to skyrocket. Fortunately, prices have come down just a bit from their peaks, particularly for lumber and copper but they are still historically high.

On the demand side, consumers are still willing to pay the higher prices. This is helping retail companies get back to pre-pandemic numbers. People want to spend right now, especially on travel and entertainment and it’s showing up in high occupancy rates for hotels and full flights at the airports.

Take a look at the Outlook section below to see what events could move the markets over the short term.

Bond prices stayed relatively flat for both government and corporate bonds. The trend for prices is still down but bond investors may get a little relief as inflation worries ease up a little. I still expect to see bond prices lower at the end of the year versus today due to the economy starting to return to normal. Because of this, longer maturity bonds are not going to be the best investment right now. I would still try and keep your bond maturities short, no more than 2 years, to lower your portfolio risk.

The 10-year US Treasury note is now yielding 1.58% and the 30-year bond is at 2.26%, both slightly lower from last month. These rates have taken a pause in going up in the last two months but it’s a good bet that they’ll resume their upward trajectory shortly.

Interest rates barely moved in May. The charts for most savings rates and CDs look like a flat line on an EKG. These rates should move higher over the rest of the year, but the savings rates will most likely still be too low to keep up with inflation.

Currently, the average savings account is paying 0.27%, exactly the same as last month. Although safe from market fluctuations, putting all your eggs in a savings account is not the best bet, especially if you need to grow your account value.

The 1-year CD interest rate is now averaging 0.51%, about the same as last month. The 5-year CD rate is the same as last month as well, currently at 0.69%. Fyi, these CD rates have remained nearly exactly the same since February.

Mortgage rates moved lower for the second month in a row, albeit not by much. Currently, the 30-year rate sits at 3.09%, just a tad lower than it was last month (3.11%). Rates continue to remain incredibly low, which is great news for home buyers, real estate investors and refinancers. Demand remains very strong for both new and existing homes, despite prices breaking records in most locations. You might read that some areas of the country have seen home sales drop, but that is most likely due to no homes for sale (low or no inventory).

Oil prices jumped another 4.3% in May after a big rise in April. The price for a barrel of oil in the U.S. closed May at $66.32. The combination of upbeat economic data and good earnings from the oil companies helped spur the move up. Also, we are moving into the driving summer season, which historically has been positive for oil and gas prices.

Demand should continue to drive prices higher as the travel floodgates reopen. This will keep a floor under oil and gas prices even if we see increased supply by either OPEC or frackers in the U.S.

Gasoline prices jumped higher once again in May. There is a huge increase in demand as the summer travel season opens up coupled with the pandemic going away. The hack and subsequent shutdown of the Colonial gas pipeline helped that jump in prices as well. Prices at the pump are averaging about $3.05 per gallon, about 15 cents higher than a month ago. Louisiana has the cheapest gas right now, at $2.70. California has steadied above the $4 mark with an average price of $4.20 per gallon. FYI, a year ago, we were paying $1.98.

Check out the prices at the pump in your area: Gas Buddy.

Outlook

Events on the horizon that could move the markets in the near term:

Infrastructure Bill: There seems to be little progress on reaching a compromise between the democrats and republicans regarding the huge infrastructure bill the white house is pushing. It would be ideal to put something together that both sides can agree on (I can dream). The market has already priced in some of the bill’s proposals (green energy, electric vehicles, etc.). These sectors could take a turn south if these sections of the bill get thrown on the cutting room floor.
Coronavirus: We have made remarkable progress in taking control of this disease, even as we hit a grim milestone of over 600,000 deaths from Covid. Over 50% of the country has received at least one dose, up from 43% one month ago. Also, there are recent studies out that show immunity from the disease may last longer in our bodies than expected. This is great news, especially if we can get another 25% of our population vaccinated while the already-vaccinated are still immune. Overall, this is a good news story for stocks now, despite the average death toll of about 590 per day here in the U.S.

Joe Baker, CFP®

Baker Asset Management, LLC

joebaker@bakerassetmanagement.com

Monthly Update – May 2021

Fun Facts about May

Birthstone: Emerald
Flower: Lily of the Valley
Zodiac signs: Taurus and Gemini
The month of May was named for the Greek goddess Maia. She was the goddess of fertility.
It is the third and last month of the season of spring.
May in the Northern Hemisphere is similar to November in the Southern Hemisphere.
The Indianapolis 500 car race is held each year during this month.
The Kentucky Derby, the world’s most famous horse race, is held on the first Saturday of May.

Stocks moved higher for the third month in a row. The S&P 500 rose over 5% in April and is now up nearly 12% for the year. Fears of inflation have caused the biggest ripples in the market’s upward moving wave, but those fears have been assuaged by the Federal Reserve sticking to their guns to keep easy money flowing to continue the economic recovery from the pandemic.

Earnings for the country’s biggest corporations were fantastic in the first quarter of 2021 compared to the same time period a year ago. That shouldn’t have been too surprising since the pandemic had shut everything down last year at that time.

Expectations for companies to continue to do well as we try and put the pandemic behind us are being set pretty high and are already being reflected in their stock prices. Sometimes this sets the markets up for a little let down so don’t be surprised if we have a pause in the market’s upward momentum in the short term.

Having said that, we have some nice positive forces acting on certain sectors of the economy that should minimize any pullbacks that we might have. For instance, the pent-up demand for travel and spending on vacations is going to go ballistic this year (restaurants, hotels, airlines, etc.). Also, the influx of funds from the government on infrastructure spending will be a boon for the markets as well (tech, materials, heavy machinery, etc.).

Take a look at the Outlook section below to see what events could move the markets over the short term.

Bond prices reversed course and headed higher as worries of inflation eased, stopping a 4-month trend of lower bond prices. I don’t think this move will last much longer as the economy continues to heat up with everything reopening. We should see bond prices return to heading lower gradually over the rest of the year. Because of this, longer maturity bonds are not going to be the best investment right now. I would still try and keep your bond maturities short, no more than 2 years, to lower your portfolio risk.

The 10-year US Treasury note is now yielding 1.63% and the 30-year bond is at 2.30%, both lower from last month. These rates have taken a pause in going up but it’s a good bet that they’ll resume their upward trajectory shortly. Still, the best option for investment income is high-quality stocks that pay dividends.

Interest rates took a breather from floating higher and most ended lower for the month of April. As I said above regarding bond prices, I don’t expect this trend to hold, and we should see rates rise over the course of the rest of the year.

On the savings side, most rates remained flat to slightly lower.

Currently, the average savings account is paying 0.27%, slightly lower than last month. This rate is still incredibly low and certainly not the best place to park all of your money.

The 1-year CD interest rate is now averaging 0.50%, the same as last month. The 5-year CD rate is the same as last month as well, currently at 0.69%.

Mortgage rates paused their inevitable move higher by slightly dipping in April. Rates continue to remain incredibly low, which is great news for home buyers, real estate investors and refinancers. Currently, the 30-year rate is at 3.11%, lower than it was last month (3.25%). Demand remains very strong for both new and existing homes. Material prices to build new homes are skyrocketing as demand increases with Covid in retreat. Existing homes for sale are being bought sight unseen and with multiple bids in many areas of the country. Mortgage rates are not the problem when we see home sales drop.

Oil prices jumped 7.5% in April after a short pause in March. The price for a barrel of oil in the U.S. closed April at $63.58. The combination of upbeat economic data and good earnings from the oil companies helped spur the move up.

Demand should continue to pick up as travel increases and the economy recovers from the pandemic shutdown. This will keep a floor under oil and gas prices until we get back to normal.

Gasoline prices moved higher once again in April. Prices at the pump are averaging about $2.90 per gallon, about 3 cents higher than a month ago. Mississippi has a wicked streak going with the cheapest fuel once again, at $2.57. California, which will never win the cheapest fuel award, has broached the $4 a gallon ($4.02) mark. FYI, a year ago, we were paying $1.77.

Check out the prices at the pump in your area: Gas Buddy.

Outlook

Events on the horizon that could move the markets in the near term:

Infrastructure Bill: Negotiations are continuing, and everyone is hoping for a compromise before Congress goes on recess in August for a month. This is a big bill and it’s going to take a while to hammer out the details that everyone can agree on so it can be signed into law. The market is already pricing in some of bill’s proposals to make it to the president’s desk by late summer. It should be a net positive for the stock market.
Coronavirus: News of the pandemic has fallen off the front page, which is good news because that means we are getting back to normal. Over 43% of the country has received at least one dose, up from 28% one month ago. But we are seeing a slowdown in the vaccination rate even though there are plenty of shots available in most of the country. There is still a small percentage that aren’t getting their second shot to complete their vaccination and there is a bigger percentage that are just against it for whatever reasons. Regardless, we are much closer to getting back to normal every day and people are ready to get out and enjoy life, which is always good for the economy and the markets.

Joe Baker, CFP®

Baker Asset Management, LLC

joebaker@bakerassetmanagement.com

Monthly Update – April 2021

Fun Facts about April

Birthstone: Diamond
Flower: Daisy and the sweet pea
Zodiac signs: Aries and Taurus
April 1 is All Fools’ Day—otherwise known as “April Fools’ Day.”
In the Southern Hemisphere, April is the same as October in the Northern Hemisphere.
The Boston Marathon is held during April.
In Ancient Rome the month of April was sacred to the goddess Venus.
In England, there are many cuckoo festivals. The arrival of the cuckoo bird in April is a signal that spring has arrived.

Stocks continued their climb for the second month in a row. The S&P 500 rose over 4% in March and is now up 5.8% for the year, not too shabby. With that said, there are signs of a changing of the guard in the stock market leaders. The big tech companies that benefited from the stay-at-home rules of the pandemic are now not so hot and are giving way to the downtrodden air travel, leisure, and entertainment sectors. In fact, many of the stock prices of companies in these industries have already factored in a fully open economy so be careful if you are looking to invest in one of these areas.

The markets have been getting pushed and pulled, most recently, by rapidly changing interest rates, good and bad news on the pandemic front, and favorable reports of the economy getting back on track.

Regarding the pandemic, in last month’s update, I said that we were close to 2 million doses per day. We are now at 3 million per day. We’re also seeing an increase in the number of new cases as well, due to more contagious variants as well as reduced restrictions by states and local municipalities. But overall, there is light at the end of the tunnel. Thanks again to everyone from the researchers to the needle makers to the frontline workers stabbing us!

There is another big market catalyst coming in the form of a monster infrastructure bill that the White House is laying out this week. I’ll touch on this and the other market forces mentioned above in more detail below.

Take a look at the Outlook section below to see what events could move the markets over the short term.

Bond prices dropped across the board once again as worries of inflation increased among investors. This was expected and may continue for a while as the world starts to reopen. March was the fourth month in a row for falling prices. Not a good sign for holders of bonds with long maturities. If you are a bond buyer and this trend continues, try and keep your bond maturities short, no more than 2 years, to reign in some of the risk in your portfolio.

The 10-year US Treasury note is now yielding 1.72% and the 30-year bond is at 2.42%, both much higher from last month. These rates rising could become a problem if the 10 year gets close to 3% and/or the 30 year gets near 5%. For now, the best option is still high-quality stocks that pay dividends. These rates should be monitored closely if you’re concerned about a market selloff in stocks (who isn’t?).

Interest rates, as expected, rose once again as the goal of reaching herd immunity becomes more realistic. Rates are still very low, but they seemed to have bottomed out and are marching onward and upward.

On the savings side, most rates moved slightly down even though bond rates went sharply higher.

Currently, the average savings account is paying 0.29%, slightly higher than last month. This rate is still incredibly low and not the best place to park all of your money.

The 1-year CD interest rate is now averaging 0.49%, lower than the 0.52% it was yielding a month ago. The 5-year CD rate is lower as well, currently at 0.68%.

Mortgage rates moved higher once again in March, but still continue to remain incredibly low, which is great news for home buyers, real estate investors and refinancers. Currently, the 30-year rate is at 3.25%, a bit higher than it was last month (3.14%). Demand remains very strong for homes as inventories continue to diminish. Material prices to build new homes are much higher than this time last year. For instance, lumber prices are 234% higher than last April and copper prices have almost doubled in the same time period. It is still a seller’s market in the housing sector as these low rates, high material costs, and low inventory are keeping housing prices high.

Oil prices simmered down a little in March after a big runup to start the year off. The price for a barrel of oil in the U.S. dropped about 2% to $60.44. This broke a 4-month string of higher prices. I’m surprised prices didn’t keep moving up, especially after that big ship tried to pull a U-turn in the middle of the Suez Canal.

Demand should continue to pick up as travel increases and the economy recovers from the pandemic shutdown. This will put a floor under oil and gas prices until we get back to normal.

Gasoline prices moved higher once again in March. Prices at the pump are averaging about $2.87 per gallon, about 15 cents higher than a month ago. Mississippi has the cheapest fuel again, at $2.59. California, which will never win the cheapest fuel award, is approaching $4 a gallon ($3.90). FYI, a year ago, we were paying $2.00.

Check out the prices at the pump in your area: Gas Buddy.

Outlook

Events on the horizon that could move the markets in the near term:

Infrastructure Bill: The Covid relief was put into law and the stimulus checks have been hitting bank accounts for the past few weeks. Now Biden and his team are going to try and sell a huge infrastructure plan to the American people and Congress. I’ll talk about this more over the next month since the final version will most likely be very different than what is currently being proposed. Regardless, this will be a net positive for stocks.
Coronavirus: We continue to corral this virus with shots in the arm coming in at 3 million per day now. Over 28% of the country has received at least one dose. Good stuff. Also, a majority of states are now allowing any adult to get the vaccine. However, there is still a lack of supply in many regions. I know here in Charleston, SC, it is still pretty tough to get an appointment. The good news is that there are more and more vaccine shipments everyday so the supply issue could be resolved sooner than later. I’m ready to remove this event off of the Outlook section.

Joe Baker, CFP®

Baker Asset Management, LLC

joebaker@bakerassetmanagement.com

Monthly Update – March 2021

Fun Facts about March

Birthstone: aquamarine and bloodstone
Flower: daffodil
Zodiac signs: Pisces and Aries
The name March comes from the Roman god of war, Mars. For many years, March, being the start of spring, was also the start of the New Year.
March 8 is International Women’s Day, which is a day that not only celebrates the achievements of women and the progress made toward women’s rights, but also brings attention to ongoing struggles for equality around the world.
March 14 is the start of Daylight-Saving Time, which begins at 2:00 A.M. that day. If your area observes it, don’t forget to “spring forward” and set the clocks one hour ahead, or you may find yourself an hour late to everything!
March 17 is St. Patrick’s Day. According to folklore, folks wear a shamrock on St. Patrick’s Day because the saint used its three leaves to explain the Trinity.
March 20 brings about the March equinox—also called the vernal or spring equinox in the Northern Hemisphere—marking the beginning of spring. In the Southern Hemisphere, this date marks the autumnal equinox and the beginning of fall. On this day, the Sun stands directly over Earth’s equator.
March 27 is the start of Passover, which begins at sundown on this day.

Stocks managed to muster a little comeback after starting off the year in the red. The S&P 500 rose almost 3% in February and is now positive for the year by 2.2%.

All sorts of good news is coming out with our battle against covid. We’re getting close to almost 2 million doses per day which should get us to herd immunity by October. But with vaccine production ramping up, we could see herd immunity sooner than that. I’m thinking around July (fingers crossed). There is definitely optimism in the air. Cruise bookings are jumping as well as air travel. I recently flew down to Florida and all 4 planes that I flew on had every seat filled.

Regarding the pandemic, we’re obviously not out of the woods by any means, but there is plenty of good data coming out that indicates we are much closer to getting back to some sort of normal.

Take a look at the Outlook section below to see what events could move the markets over the short term.

Bond prices continue to drop as the world starts to reopen. February was the third month in a row for falling prices. This trend should continue as our economy gets back to a more normal mode. Not a good sign for holders of bonds with long maturities. If you are a bond buyer and this trend continues, try and keep your bond maturities short, no more than 2 years, to reign in some of the risk in your portfolio.

The 10-year US Treasury note is yielding 1.46% and the 30-year bond is at 2.18%, both much higher from last month. It’s starting to get interesting because rates may keep rising to a point that bonds will look as attractive as stocks. This could cause a stock market selloff, so it is something to monitor closely.

Interest rates rose once again as the goal of reaching herd immunity becomes more realistic. Rates are still very low, but they seemed to have bottomed out and are marching onward and upward.

On the savings side, most rates moved slightly down even though bond rates went sharply higher.

Currently, the average savings account is paying 0.26%, slightly lower than last month. Although it is safe, it’s not the place to put all of your retirement savings, that’s for sure.

The 1-year CD interest rate is now averaging 0.52%, about the same it was yielding a month ago. The 5-year CD rate is flat as well, still at 0.69%.

Mortgage rates rose smartly, but still continue to remain incredibly low, which is great news for home buyers, real estate investors and refinancers. Currently, the 30-year rate is at 3.14%, notably higher than the 2.86% it was charging last month. Demand remains very strong for homes as inventories continue to diminish. It is definitely a seller’s market in the housing sector as these low rates are enticing first time homebuyers as well as city workers moving out to the burbs in response to work-at-home options.

Oil prices really shot up in February in response to the increased demand as the world starts moving around again. This was the fourth month in a row of higher prices, with prices jumping 18% in February.

Travel is continuing to pick up, especially by air, and as more vaccines get into people’s arms, the more confident people will be to travel, which should boost prices even more.

Gasoline prices moved higher in February, as expected. Prices at the pump are averaging about $2.72 per gallon, about 30 cents higher than a month ago. Mississippi has the cheapest fuel again, at $2.38. FYI, a year ago, we were paying $2.46.

Check out the prices at the pump in your area: Gas Buddy.

Outlook

Events on the horizon that could move the markets in the near term:

More Stimulus: Still waiting. The bill has passed in the House of Representatives and now goes to the Senate with the hopes of becoming law by mid-March. I feel like this is pretty much baked into the cake already, at least the stimulus payments anyway. If it fails to pass or passes with reduced stimulus payments, we could see a short-term selloff in the markets.
Coronavirus: We’re making incredible progress on the vaccination front. Another vaccine has been approved (Johnson & Johnson) and this one requires only 1 shot. We are up to 1.74 million doses per day and a total of 75.2 million doses have been given so far. This puts us close to 10% of the population being vaccinated. Herd immunity is expected to be reached in early fall. I believe it could be earlier once we get this third vaccine in the pipeline. Really good news all around. Let’s keep it going.
Trade Wars/Tariffs: Right now, it looks like Biden is putting this on the back burner. I have to disagree. These tariffs are putting a hurting on our economy. A recent study shows that the tariffs have cost the U.S. 245,000 jobs since they were implemented. Tariffs might have worked 150 years ago but in today’s global economy, they benefit neither party. Get rid of them and stop the bleeding. This will be a nice boost for the markets if we get rid of them.

Joe Baker, CFP®

Baker Asset Management, LLC

joebaker@bakerassetmanagement.com

Monthly Update – February 2021

Fun Facts about February

Birthstone: Amethyst
Flower: Primrose
Zodiac signs: Aquarius and Pisces
February was added to the Roman calendar in 713 BC. The length of the month changed over time and, at one time, it had as few as 23 days. When Julius Caesar remade the Roman calendar, the month was assigned 28 days during normal years and 29 days during leap years which occur every four years. 2020 was our last leap year.
In the Southern Hemisphere, February is a summer month the equivalent to August.
The month is named for the Latin word, februum, which means purification.
February is Black History month.
Notable days in February include: Groundhoug, Valentine’s, President’s, Mardi Gras, and Ash Wednesday.

Stocks took a breather in January after a nice run to close out 2020. The S&P 500 index slid down by 1% to start off 2021.

Vaccine rollout is starting to smooth out with help from the new administration and the private sector. Also, the big drops in covid cases across the country is positive news for the stock market as well. Still, there are some negative forces that are putting a damper on stocks. One is the variant strains of the virus that are popping up across the globe that may be more resistant to the current vaccines. Another is the insane market action in the most heavily shorted stocks, such as Gamestop and AMC Entertainment, to name a few. Although this is perfectly legit trading, it certainly scares investors that stock prices can be manipulated so easily. When investors are scared, they sell. The good news (except for the holders of these stocks) is that this will be short lived.

Take a look at the Outlook section below to see what events could move the markets over the short term.

Bond prices dropped for a second straight month in January as rates rose on good news of more vaccine rollouts. If you are a bond buyer and this trend continues, try and keep your bond maturities short, no more than 2 years, to reign in some of the risk in your portfolio.

The 10-year US Treasury note is yielding 1.09% and the 30-year bond is at 1.86%, both higher from last month. Who’s buying these bonds with such low interest payments? Just not worth it for me.

Interest rates climbed a bit in January as hopes of an economic rebound gained footing with the increased deployment of covid vaccines throughout the country. Even with this bump in rates, they are still extremely low, which is great for borrowers but just horrible for savers.

On the savings side, most rates remained relatively flat over the last month despite a rise in government bond rates.

Currently, the average savings account is paying 0.28%, slightly lower than last month. Although it is safe, it’s not the place to put all of your retirement savings, that’s for sure.

The 1-year CD interest rate is now averaging 0.53%, the same it was yielding a month ago. The 5-year CD rate is flat as well, now at 0.69% from 0.70%.

As of December 2020, the average savings rate across the U.S. is 13.7%, which is about twice the normal rate but much lower than the high it reached back in April of 34%. The money saved by staying home due to the pandemic is keeping this savings rate elevated for the time being. We should see this drop over the next couple of readings since the rate will account for holiday spending and holiday travel expenses. Here is a great chart that shows the average U.S. savings rate all the way back to 1959. You’ll see that our current savings rate hasn’t been consistently this high since the mid 70’s.

Mortgage rates continue to remain incredibly low, which is great news for home buyers, real estate investors and refinancers. Currently, the 30-year rate is at 2.86%, 9 basis points lower than a month ago. Demand remains very strong for homes as inventories continue to diminish. It is definitely a seller’s market in the housing sector as these low rates are enticing first time homebuyers as well as city workers moving out to the burbs in response to work-at-home options.

Oil prices ticked higher again for the third consecutive month as the global economy tries to get back on track. U.S. crude went up about 8% in January. One reason for the increase is the high probability of an output cut by OPEC in February.

Travel is continuing to pick up, especially by air, and as more vaccines get into people’s arms, the more confident people will be to travel, which should boost prices even more.

Gasoline prices moved higher in December, as expected. Prices at the pump are averaging about $2.42 per gallon, about 17 cents higher than a month ago. Mississippi has the cheapest fuel again, at $2.11. FYI, a year ago, we were paying $2.50.

Check out the prices at the pump in your area: Gas Buddy.

Outlook

Events on the horizon that could move the markets in the near term:

More Stimulus: Even though the democrats control both houses of Congress and the White House, it will still be difficult to pass a bipartisan covid relief stimulus package. There is definitely consensus that more needs to be done but how much is the hurdle that they have to overcome to get something passed soon. If they can get something done, it could give the markets the boost that it needs.
Coronavirus: We saw the spike in January that we expected after the holidays. But now, positive cases are dropping significantly and hopefully hospitalization and death rates will follow. I recently blogged about progress on the vaccine front. You can read about that here. As I said earlier, we’re getting good news on the vaccination rate but we’re also getting bad news on the mutated strains that are popping up all over the world. These positive and negative forces will continue to create market swings until we get a majority of our population vaccinated.
Trade Wars/Tariffs: Although very important to our economy, it sounds like this topic is going to the back burner until we get a handle on the pandemic.

Joe Baker, CFP®

Baker Asset Management, LLC

joebaker@bakerassetmanagement.com

Monthly Update – January 2021

Happy New Year! (and good riddance 2020)

Fun Facts about January

Birthstone: Garnet
Flower: Carnation
Zodiac signs: Capricorn and Aquarius
January was named after the Roman god Janus. Janus is also the Roman word for door. The god, Janus, had two faces which allowed him to look forwards into the coming year and backwards into the past year.
On average, it is the coldest month of the year in the Northern Hemisphere.
In the Southern Hemisphere January is a summer month the equivalent of July.
Martin Luther King Jr. Day is always on the 3^rd Monday in January (January 18^th this year).

Stocks continued their post-election/vaccine/Santa Claus rally in December after a huge November bounce. The S&P 500 index 4% for the month of December and finished the year at a very impressive 16%, especially for 2020!

I think that we saw a healthy appetite for stocks again this past month because of a few things. First, we saw vaccines go into people’s arms, which signaled there will be an end to this pandemic. Second, the election was certified at the beginning of December, providing more certainty for the markets. Seasonal factors also came into play, such as buying sprees by consumers for the holidays. This usually helps stocks in December. In fact, historical data shows that the last month of the year is the third best month to invest in the stock market.

Take a look at the Outlook section below to see what events could move the markets over the short term.

Bond prices dropped mildly through December as rates rose on good news of the vaccine rollouts. Long-term treasury bonds took the biggest hit as the yield curve attempts to normalize itself. This means that rates on bonds with longer maturities are higher than rates on short-term bonds, which makes sense, hence the term, normal. If you are a bond buyer and this trend continues, try and keep your bond maturities short, no more than 2 years, to reign in some of the risk in your portfolio.

The 10-year US Treasury note is yielding 0.92% and the 30-year bond is at 1.65%, both higher from last month. For reference, the interest rate on the 10-year dropped 50% in 2020 and the 30 year dipped about 30% in the same time period. It was a great year to own bonds if you had the intestinal fortitude for it.

Interest rates reversed course from November and did a nice, slow rise throughout December. Even with this bump in rates, they are still extremely low, which is great for borrowers but just horrible for savers.

On the savings side, most rates changed very little over the last month despite a rise in government bond rates.

Currently, the average savings account is paying 0.31%, slightly lower than last month. Although it is safe, it’s not the place to put all of your retirement savings, that’s for sure.

The 1-year CD interest rate is now averaging 0.53%, nearly the same as the 0.52% it was yielding a month ago. The 5-year CD rate is flat as well, now at 0.70% from 0.71%.

As of October 2020, the average savings rate across the U.S. is 13.6%, which is about twice the normal rate but much lower than the high it reached back in April of 34%. The money saved by staying home due to the pandemic is keeping this savings rate elevated for the time being. We should see this drop over the next couple of readings since the rate will account for holiday spending and holiday travel expenses.

Mortgage rates continue to remain incredibly low, which is great news for home buyers, real estate investors and refinancers. Currently, the 30-year rate is at 2.95%, just slightly higher than a month ago. Demand remains very strong for homes as inventories continue to diminish. It is definitely a seller’s market in the housing sector as these low rates are enticing first time homebuyers as well as city workers moving out to the burbs in response to work-at-home options.

Oil prices rose again for the second month in a row but couldn’t quite replicate the huge jump that they had in November. Still, U.S. crude went up about 6% in December but is still down 22% for the year. That’s not bad after the price being below zero back in April.

Travel is starting to pick up, especially by air, and the hope that the vaccines will bring us to the light at the end of the pandemic tunnel has caused energy prices to rise out of the abyss.

Gasoline prices moved higher in December, as expected. Prices at the pump are averaging about $2.25 per gallon, about 12 cents higher than a month ago. Mississippi has the cheapest fuel, at $1.92. FYI, a year ago, we were paying $2.58.

Check out the prices at the pump in your area: Gas Buddy.

Outlook

Events on the horizon that could move the markets in the near term:

GA Senate Elections: These are happening in the first week in January and they could be market movers. Like I said last month, If the republicans keep the Senate, I think the markets will like that balance of power. If the democrats take over the Senate, there is a better chance of things actually getting done in Congress, which may or may not be good for stocks over the next few months. Like the saying goes: What’s good for Main Street isn’t always good for Wall Street.
Coronavirus: We are still seeing a rise in hospitalizations and death rates in many parts of the nation. This makes sense since we are seeing the results of a heavy travel period during Thanksgiving weekend. Experts predict we will see another spike in January as holiday travel was relatively heavy during the last two months of December. I use this site to track these types of Covid trends: https://bing.com/covid. The great news is that we now have 2 vaccines approved for use in the U.S. You can track where we are in the vaccine process here: https://www.nytimes.com/interactive/2020/science/coronavirus-vaccine-tracker.html.
More Stimulus: Well, we did get a stimulus bill passed in December which was certainly helpful. However, Trump and the Democrats are asking for more payments to individuals and families. The Republicans are now in a bind. This changing sides stuff would be surprising if it wasn’t 2020. Regardless, if the millions of people that need it can get more money in their pockets for a little while longer than this would be a good thing, for them and for the markets.
Trade Wars/Tariffs: With a new administration coming into the White House, there is a good chance that the tariffs imposed on our imports will be removed, thus lowering U.S. companies’ costs, which will help them stay in business. This would give the markets a nice bump and it could happen rather quickly since no congressional approval is needed.

Joe Baker, CFP®

Baker Asset Management, LLC

joebaker@bakerassetmanagement.com

Monthly Update – November 2017

Stocks continued their march higher in October, hitting all-time highs for most major market indexes.

The catalyst for this continued upswing right now is most likely the expectation of some tax reform getting passed through Congress. However, they will be hard pressed to get anything approved before the end of the year, so that could be cause for a pullback, which is well overdue anyway.

Earnings reports have been excellent for the tech and banking sectors but not so hot for retail companies. Q3 is always the weakest quarter for retail stocks so that is not a big surprise.

Historically speaking, we are going into the best six months to be invested in the stock market, November through April. Possible events that could prove history wrong are war with North Korea and/or the Donald getting indicted in the Russian investigation.

Bonds took a little bit of a dip this past month as signs of a healthy economy pushed bond interest rates higher.

The Federal Reserve concludes their scheduled meeting today, November 1st, and is expected to bump interest rates another 25 basis points. Rates still seem to be bottoming out from their 30 year decline. Here’s a nice 55 year chart of the interest rate of the US Treasury 10 year note to put it into perspective: http://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart.

On the savings side, rates that banks are paying us just aren’t going up as fast as we’d like.

Currently, the average money market/savings account is paying 0.13%.

The 1 year CD interest rate is averaging only 1.51% and the 5 year CD rate is at 2.14%.

The good news is that mortgage rates continue to stay extremely low, with the 30 year refi rate at 3.92%. Depending on the loan terms, if you have a current mortgage with a loan rate over 5%, you should at least check out refinancing it.

Oil prices rose about 5% in October.continuing its upward trend since bottoming in June. Price per barrell now sits at $54.20.

Even though we still have 1 month left in the hurricane season, prices are reflecting a return-to-normal after the damage and disruption caused by Hurricane Harvey.

Prices should hold steady for the rest of the year.

Nationally, gasoline prices are averaging about $2.47 per gallon. FYI, a year ago, we were paying $2.20. Chattanooga, TN has the cheapest gas in the country at $2.10.

Check out the prices at the pump in your area: Gas Buddy.

Outlook

Events on the horizon that could move the markets in November:

Russian Investigation: Odds are slim that Mueller will indict President Trump, but it does appear that more of his aides and appointees will be in his crosshairs shortly. Any market pullback from this should be short lived and will provide a buying opportunity for long term investors.
Escalating Tensions with North Korea: The stock market, so far, has shown little concern with the wing nut that rules NK. However, he does no how to push Trump’s buttons. So, at some point, these two bullies may call for a fight in the playground after school. Hopefully, the adults will show up for both sides and cooler heads will prevail.