Newsletter

China’s economy seems to be following the “East Asian Development Model”, the same approach used by South Korea and Taiwan. The model emphasizes exports, investments in infrastructure, and heavy industry. In addition, economic and political control is centralized.

Such economies follow a cycle of strong initial growth, but growth eventually levels off amid political and financial distress. At some point, economies are forced to move to more market-oriented economic and political management.

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Global stock markets returned 5.8% during June, with domestic and foreign equities advancing 6.8% and 4.5%, respectively. The second quarter ended with returns of just over 6% for global equities and was led by double-digit returns for technology stocks. Global equities are now sporting returns of nearly 14% for the first half of 2023.

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Global stocks declined by just over 1% in May. Foreign stocks saw declines of over 3% for the month, while domestic equities were essentially flat. Bond investors also saw declines of about one percent during May. The yield on the benchmark U.S. 10-year Treasury note is now at 3.64%, up about 0.2% for the month.

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Global stocks advanced 1.4% during April and are now up about 9% for the first four months of 2023. Global equities have actually rebounded more than 19% since the market lows reached last September. While many investors remain fixated on the steep market losses incurred during calendar 2022, they may not realize that global stock markets have been rising at a compounded annual rate of just over 12% for the past 36 months.

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The demand for personal computers has softened, and chip makers are cutting production. The smartphone marketplace has basically peaked, as have the markets for wireless services and video streaming. 

The largest technology stocks – Apple, Microsoft, Alphabet, and Amazon – grew a collective 1% in the fourth quarter of 2022. Revenues are stalling or on the decline, as the headlines speak of layoffs and efficiency instead of innovation and opportunity.

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Global stocks and bonds each advanced about 3% in March, as investors survived a hectic month with solid returns. Despite bank failures and ongoing inflation concerns, domestic and foreign stocks had similar returns of about 7% for the quarter. The technology-based Nasdaq Composite index had a quarterly gain of 17%, a nice bounce after the 32% decline during calendar 2022.

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Just last week, we had the second and third biggest bank failures in U.S. history – Silicon Valley Bank (SVB) and Signature Bank. Last night, we learned that UBS agreed to take over Credit Suisse … the first megamerger of systemically important banks since 2008. Coincidentally, fifteen years-ago to the month, the Federal Reserve rescued Bear Stearns. That was the first shoe to drop in what would eventually become the Great Recession of 2008/2009.

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Global stocks declined nearly 3% in February, as worries over inflation were exacerbated by data suggesting the economy is not cooling. Global bond prices were also off by about 3% for the month. Still, for the first two months of the year, global stocks are up more than 4%, while global bond prices are basically flat. Inflation readings in January from a year earlier were slightly higher than those for the 12 months through December. Meanwhile, consumer spending in January was up 1.8% from the previous month on a seasonally adjusted basis … the largest increase in two years.

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Financial markets got off to a strong start to the new year, with January returns for global stocks and bonds reaching 7.17% and 3.28%, respectively. Declining interest rates pushed up bond values and also helped the tech-heavy Nasdaq Composite Index to a gain of nearly 11% for the month. Overall, investors remain optimistic that the Fed will soon pause rate hikes, and eventually even reverse course.

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Married couples have four times as much wealth as unmarried couples who live together.  Combining assets may be one of the reasons.   Research from Cornell University and the University of Colorado at Boulder suggests that couples who combine checking, investing, and credit card accounts are happier over the long term.  Pooling resources leads to a greater feeling of accountability and also helps to achieve certain milestones, such as buying a home and saving for retirement. 

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