March 1, 2024
February Market Commentary - Will a Booming Economy Stay Powell's Hand?
As goes January, so goes the year.
That old stock market canard has a double-edged meaning this year, as the stock market as measured by the S&P came in strongly positive. But the path to getting there included dashed expectations for lower rates in March and a slew of data that would seem to indicate a booming economy but with some cracks beginning to show.
The strength of the data, with solid GDP growth and falling inflation, was enough to have some economists declaring that either the “soft landing” for the economy had already occurred and the plane was safely on the ground, or it had refueled in mid-air and was gliding along nicely.
Whatever the metaphor, economic rules got broken in 2023, as the consumer held steady, unemployment stayed historically low, wages grew and somehow – inflation fell.
Fed Chairman Powell came under ferocious criticism for how long he waited to raise rates as the economy recovered from the pandemic, and for his insistence that inflation would be “transitory.” But once he got going, the speed and size of rate cuts were breathtaking. It looks now like the strength of the economic recovery allowed for a massive tightening without tipping over into recession. Is Powell a monetary policy magician? Or did he just get lucky?
Headlines We're Tracking
The Brutal Reality of Plunging Office Values Is Here
Commercial-property deals in the US are starting to pick up — at deep discounts that are forcing lenders around the world to brace for souring loans.
The shakeout in the $20 trillion US commercial real estate market has long been delayed for a simple reason: No one could figure out just how much properties were worth. And, more crucially, few wanted to.
The Definitive History of Private Credit
Private credit is the hot thing on Wall Street right now. Not a day goes by without someone proclaiming it’s the “Golden Age” of private credit on Bloomberg. According to BlackRock, the asset class has more than tripled since 2015 to $1.6tn in global assets under management.
Some very quick definitions
In the following history of private credit, I primarily refer to private credit in the direct lending sense: a non-bank source of cashflow-based lending issued to fund private equity-backed acquisitions of companies. Put simply, direct lending is when a financial institution, other than a bank, lends money to company. Direct lenders usually make their lending decisions based on the borrower’s cash flow rather than asset base, the borrowers are typically mid-sized, and the deals are usually backed by private equity sponsors.
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TurboTax vs. Accountant
Tax prep software like TurboTax has come a long way over the years, and in general does a great job filing your returns for little money. But once your financial profile becomes complex enough you might benefit a great deal from speaking with a real live professional.
While tax software is great at compliance (reporting on transactions that’ve already happened), it’s not great at tax planning (making decisions about transactions that haven’t happened yet.
This video covers when your situation might be complex enough to require some professional help.
Latest From the Podcast
This week on Grow Money Business we are talking about stock concentration and the Magnificent 7. Last year, there was a group of seven companies that produced a huge portion of the S&P 500’s approximately 20% annual return. Join us as we dive into why these seven companies out-performed, arguments for why they may or may not continue to out-perform, comparisons for this type of stock concentration to other periods historically, and more.
In this episode of Grow Money Business, we are joined by Rocky Lalvani. Rocky is a chief profitability advisor and currently works in his business consulting practice following the principles written in the book ‘Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine’ by Mike Michalowicz. Rocky has access to profit specialists worldwide, is certified in the Profit First method, and has firsthand experience boosting revenue for multiple companies. In this conversation, we talk about small business cash management, managing cash flow and profitability, understanding your business finances, common mistakes business owners make, and more.
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-Grant