Weekly Commentary,5/31/2023, Capital Markets

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Economy:

As of this writing, a debt ceiling increase has yet to be approved. There is a tentative consensus, and voting is pending. Both sides seem unhappy with the compromises they had to make to make the deal palatable to their partisan backers. On May 26, 2023 the Bureau of Labor Statistics released Personal Consumption Expenditures Price Index. The inflation is not getting under control and has slightly increased, according to that report. Federal Reserve meeting is coming up, and the data from this report might weigh more for decision-making.

Stocks/Bonds/Alternatives:

The yield curve remains inverted, sending some nervous signals among seasoned investors. Housing prices seem stable but are still at nearly the decade's highs. A steady job market appears to help the housing market, as prices have not decreased. However, this might not be the case if the economy cools further. The weekly economic index has continuously declined for the past few months. The WEI data does not bode well for the near term if further increase in interest rates happens.

The continuous positive press about newer technologies is helping the Information Technology sector. It was the most significant losing sector last year, and it is the biggest gainer this year. The energy sector nearly lost all the gains it made last week. The price movement in sectors may seem random, it is anything but. Traders interested in short-term profits move money among different sectors creating winners and losers daily and weekly. All sectors are unequal in their losses or gains across different time frames. For the patient investors, this creates opportunities when rebalancing or reallocating new cash flows. Please check the short- and long-term matrix views of stock sectors shared here.

Insights:

Stock markets have represented the turmoil that is going on in our government. With some positive news expected regarding the debt ceiling raise this week or next week, this should change. The institutional investor with billions/trillions of investor money, decides the market's direction based on the news and economic cycles. Short sellers' profits are quicker in a destructive news cycle and a cynical economy. Individual investors get wary with the tricks of the trade, and get nonchalant or give up on the long term potential of markets. Planning for liquidity is the best antidote for the seeming randomness of markets. It always requires a more profound study beyond the cursory first page of Google results or cable news stock coverage.

Most institutions(especially the older and larger ones) are involved in all sides of the stock, bond trading. They can short-sell, buy, or repackage them into different funds whose strategies could counter investor interests, at least some of their customers. These conflicts of interest are subtle and difficult to track down at the micro level. Often, they have paid fines when FINRA or SEC found out after the fact. That is a minuscule percentage compared to the subtle conflicts that could happen. So being aware of these issues, while being optimistic about the long-term benefits of capital markets is required to harness the compounding wonders possible in the aforementioned.

Contact:

Raghu Kumar Komari, CPM?, Candidate for CFP? Certification

[email protected]

www.iriswealthadvisory.com

Disclosures/Disclaimers:

The commentary is provided for educational purposes only. It shall not be considered Investment Advise, Financial Planning Advise, or a recommendation of specific funds. Fees and taxes are not included in any hypothetical model or fund analysis. Please do your due diligence.