SVP Paul Nolte Quoted On Yahoo Finance 6.22.22

Kingsview SVP Paul Nolte discusses inflation and how the fed is strongly committed to bring inflation down.

Read the full article here: Yahoo Finance

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Nolte Notes 6.22.22

June 13, 2022

Download the PDF here.

It has been said for millennia, sometimes for little comfort. “It is the darkest before the dawn”. Yet another huge drop in the equity market, now down in ten of eleven weeks and well into bear market territory. The Fed meeting did little to assuage inflationary fears as investors believe the Fed has little in their arsenal to fight rising food and energy prices. Powell’s comment at the press conference that another 0.50 or 0.75% rate hike is on the table for July and likely another 0.50 in September. It was only nine months ago that inflation was seen as transitory. What a difference a few months can make! To be sure, the rate increases are impacting parts of the economy, like housing, where mortgage rates are getting over 6%, when they were merely 3% at the start of the year. Housing activity has waned, lumber prices have cratered. One other part of the economy could see some bargains in the months ahead: retail stores. Comments from the biggest retailers about excess inventory could lead to sales during the summer to cut the inventory back to more normal levels. It is not the price cutting that many consumers need to see, but it is a start.

How bad has this year been for stocks? There have been only a handful of times that the markets have dropped by 15% in one quarter (assuming the market finishes close to current prices in two weeks) AND have dropped by 20% over two quarters since WWII. The good news is that, except for 2008, the next quarter was positive. In all cases the markets were higher a year later. When looking at the post-war bear markets, of the 14 prior bear markets, only three saw the markets lower a year later: 1974, 2001 and 2008. Based upon the historical trading record, the markets are likely to bottom within the next six months or so. This lines up well with the pattern of mid-term elections. The markets generally trade poorly into mid/late summer and then rallies strongly to the Presidential election. If there was a fly in the ointment, it is that the markets are still historically priced richly, especially if inflation and interest rates remain high. Fed Chair Powell will get another shot at explaining the Fed’s decision and outlook this week when he visits Congress. Keep your seatbelts fastened.

Interest rates were all over the map last week. The yield on 10-year treasury notes started out at 3.15%, rose as high as 3.50% and ended the week at 3.22%. Commodity prices fell 5% on the week, with oil prices (not at the pump!) dropping 7% just on Friday. Worries early in the week of an impending recession seemed to give way to the belief we are currently IN a recession. This would explain the funk that the stock market is in as well. For now, rates seem destined to rise, especially if the Fed is good on their word that they will be hiking rates through Labor Day.

One other part of the market that is “signaling” that better days are indeed ahead is the various asset classes and sectors within the SP500 are all at or near momentum lows. This has occurred close to market bottoms in 2020, 2018, 2015, 2009 and 2002. It doesn’t mean the markets will go straight up from here, but a bit of nibbling on a broad basket of stocks may be rewarding over the coming 12 months. Given the fall from grace over the past six months, growth stocks could bounce back the strongest in the months ahead. That said, the case can be made for international stocks that could benefit if the dollar weakens. Very broadly, the incredible rise in bond yields have made bonds an interesting sector as well. Everything is cheap, but for a very good reason, higher interest rates and inflation. If either of those can subside or at least stop their meteoric rise, investors may once again return to the stock market. It may be hard to see from here when smoke gets in your eyes.

The daily large swings in the markets are not likely to calm down anytime soon. Fed Chair Powell will be in front of Congress this week and many other Fed officials will be explaining their economic views. The hard economic data will be thin until after July 4th, but that does not mean stocks will be enjoying the summer wind.

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The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable but are opinions and do not constitute a guarantee of present or future financial market conditions.

Program: Fox Now
Date: 6/3/2022
Station: Online
Time: 10:37AM

REPORTER: Unemployment is down a little and the price of gas is up a lot. So what’s that mean for the economy? It’s complicated.

There’s already early signs that inflation is peaking. But if you if you look at numbers such as the number of quits or outstanding jobs, jobs available, they are actually starting to peak and roll over.

REPORTER: Economists are worried because since the fifties, inflation over 4%, combined with unemployment under 5%, has meant the US economy was headed for a recession within two years. Inflation now stands at 8.3% and the May jobs report out Friday is expected to show the unemployment rate dipped to three and a half percent.

SCOTT MARTIN: The data in the economy is not awesome. It’s not really horrible. So I think we’ve got kind of a soft landing slowdown definitely upon us.

STEVE FORBES: When the Federal Reserve talks about a soft landing, you better put your seat along.

REPORTER: Drivers are looking for relief. The national average for a gallon of regular hit 4.72 on Thursday.

CONSUMER: Everything is sky high where I used to fill my tank for $50. Now it’s $80.

****

3:00

SVP Paul Nolte Interviewed on WGN Radio 6.14.22

Paul Nolte, Senior VP at Kingsview Wealth Management, joined Bob Sirott to talk about the Fed’s plans to raise rates, why the housing market is slowing down, and the benefits of short term gains. He also discussed why cryptocurrencies are more risky than other investments and retail sales numbers.

Click here to listen to the interview.

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Nolte Notes 6.13.22

June 13, 2022

Download the PDF here.

“My mama told me there’ll be days like this”. If Thursdays 2% drop in the averages was not enough, Friday’s inflation report pushed stocks down another 2%, making it a full 5% on the week. The market is now back to the May lows. The coming week will have plenty for investors to watch, from the Fed meeting to retail sales and other inflation reports. The strong consumer inflation report came as little surprise to main street as they watched gas prices jump daily and every trip to the grocery store was ever more expensive. Even the core rate was above expectations, so the hope of “peak inflation” remains somewhere in the future. As a result, interest rates shot higher, with short-term rates moving more than long rates. The implication is that the Fed could now justify a 0.75% hike in rates this week, up from 0.50% that had been expected. There was a time when the Fed wanted inflation, fearing that persistently low inflation could tip toward a deflationary cycle and persistently poor economic growth. The thought was the Fed could better deal with inflation than deflation, now that inflation is here, the Fed will be put to the test in the months and years ahead.

If inflation is always and everywhere a monetary phenomenon means, according to Milton Friedman, inflation is caused by increases in monetary supply. Historically, monetary growth has been between zero and 10% on a year-over-year basis, with spikes usually occurring as the economy hit a recessionary period. The pandemic gave the Fed and the government a reason to send out huge amount of money as the economy was thrown into reverse. The supply of money just from the Fed jumped 15% in five months and continued higher until last month, when the series turned negative. The chore ahead will be to remove that monetary accommodation from the economy in the months ahead, which is likely to push the economy into a recession. The economy remains in a strange place, with China largely shutdown, demand for goods/services very high and companies trying to expand production. There are signs that the higher rates since the start of the year are biting some sectors, with lumber prices off more than 50% from the start of the year and housing activity beginning to slow as mortgage rates surpass 5% from under 3% at yearend.

The interest rate complex reacted swiftly to the inflation news. Short-term rates rose much quicker than long-term rates, flattening the yield curve. When short rates are above long rates (inversion), it has historically been a recession warning. Rates were briefly inverted in early April and are today merely 0.09%. One other sign of rising risks is the difference between yields on junk bonds and treasuries. That is once again widening, indicating investors prefer the safety of treasury bonds vs. the higher returns and risks in junk bonds. Combined with a once again rising commodity complex, the inflation genie is not likely to be bottled up until 2023 at the earliest.

The decline into the weekend left negative signs across the board, with large, small, value, growth and international all declining as investors sold anything/everything they could. Volume expanded, but not to the level that would indicate panic selling. Investor sentiment is very bearish and could spark a short/sharp rally of 5-10% like March and May. Even the energy sector saw losses last week. For the fourth time since last Thanksgiving, the volume on declining stocks was over three times that of rising stocks for three consecutive days. After each occurrence, the markets managed to mount a “reflex” rally. Add to the mix very pessimistic investors, a rally could be a launching pad for significant gains over the coming year. In the short-term however, investors will still have to deal with the Fed meeting this week. The discussion of how high and quick the Fed will be in hiking rates is likely to be center stage. The short-term pain could turn toward long-term gains IF the inflation picture brightens during the summer.

The impact of the inflation data is likely to roll into this week as well, especially with the Fed meeting that ends Wednesday afternoon. Expectations for rate increases going forward should get reset and the markets may be able to “move on” and turn their focus toward the beginning of earnings season that will start after the 4th of July.

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The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable but are opinions and do not constitute a guarantee of present or future financial market conditions.

Program: Fox Now
Date: 6/3/2022
Station: Online
Time: 10:37AM

REPORTER: Unemployment is down a little and the price of gas is up a lot. So what’s that mean for the economy? It’s complicated.

There’s already early signs that inflation is peaking. But if you if you look at numbers such as the number of quits or outstanding jobs, jobs available, they are actually starting to peak and roll over.

REPORTER: Economists are worried because since the fifties, inflation over 4%, combined with unemployment under 5%, has meant the US economy was headed for a recession within two years. Inflation now stands at 8.3% and the May jobs report out Friday is expected to show the unemployment rate dipped to three and a half percent.

SCOTT MARTIN: The data in the economy is not awesome. It’s not really horrible. So I think we’ve got kind of a soft landing slowdown definitely upon us.

STEVE FORBES: When the Federal Reserve talks about a soft landing, you better put your seat along.

REPORTER: Drivers are looking for relief. The national average for a gallon of regular hit 4.72 on Thursday.

CONSUMER: Everything is sky high where I used to fill my tank for $50. Now it’s $80.

****

3:00

SVP Paul Nolte Interviewed on WGN Radio 6.7.22

Paul Nolte, Senior VP at Kingsview Wealth Management, joined Bob Sirott to discuss when we could see a recession hit the economy, how long inflation rates could go, how high are interest rates going to get, and more.

Click here to listen to the interview.

5:00

Nolte Notes 6.6.22

June 7, 2022

Download the PDF here.

June 7, 2022“I see a bad moon arising, I see trouble on the way…I see bad times today.” In what may have been the topic of discussion between the Fed Chief and the Commander in Chief, both did a little finger pointing. Sounding more like Laurel and Hardy (Another nice mess) than Creedence Clearwater, both had few answers to solve the inflation problem facing world economies today. Even Janet Yellen (former Fed Chief and current Treasury Secretary) admitted she was wrong about the path of inflation. Now that inflation is proving a bit more than transitory, the solutions are proving to be a bit tougher to figure out. Rate increases to slow economic growth is one tool of the Fed, but hikes will take time to impact the economy. Higher rates will not put food on grocery shelves and cheaper gas at the pump. Putting more money into the economy is not the solution either. Unfortunately, inflation will be with us for much longer than many expect as the global economy continues to “right-size” after coming to a screeching halt and restarting from a very different starting point.

The economic data of the week was the employment report, which was met with a bit of a yawn. Another 300k+ in jobs “created” (or re-created) and wages grew at a 5% annual clip. Digging a bit deeper, however, shows labor participation stagnant, time on unemployment jumping and the “goods producing” portion of the economy job growth slowing for the second consecutive month. As consumers shift their spending from “stuff” to “experience” the recent report supports that shift. Comments from airlines and hotels about lack of “space” indicate people are very comfortable moving about the country. The coming week investors will focus upon the inflation reports, which should remain around the recent high-water mark of 8%. If there is any potential consolation. It is that commodity prices, in general, have been stable over the past 6-8 weeks.

This could provide a downside surprise to inflation. However, the combined still strong jobs data and higher than desired inflation rates mean the Fed is likely to hike interest rates again by 0.50% at both of their next meetings in two weeks and again in July. After declining a bit over the past few weeks, interest rates are once again on the rise. The characteristics of the rise are interesting in that it is an across the board increase in rates, meaning the relationships between short and long-term rates remained stable. The bond model remains in negative territory, as the current price on commodities is above the average price of the past six months. The same is true on bond yields, current yields are higher than their average price. The bond model continues to point to higher rates and has been for much of the time since last Christmas. Rumors of a pause in the rate hiking cycle in the fall has boosted the markets. It is too early to decide if the rate increases are having the desired impact on the economy and the rates of inflation.

The volatile nature of the markets this year has masked some interesting underlying “strength” that could provide profitable whenever the current cycle of volatility begins to temper for more than a few days. The first is small cap in general and specifically the value side of small. Small stocks have performed a smidge better than their large cap brethren. However, small value is nearly six percentage points better than the SP500. The same is true of large cap. The SP500 is down just over 13% year to date, but the large cap value index is down just 5%, while the growth index is just over 22% in the red. This is a big shift since the end of the year toward value that has not happened much since the financial crisis, which began the growth “boom”. The current market angst could mark the beginning of a shift away from growth and toward value. Less exciting is the domestic vs. international debate. Both developed and emerging markets are performing closely to the SP500 so far this year. Since the end of March, international investing has been holding up better than domestic. The best returns of the past 10 years may not be the best way to invest for the next 10 years.

Investors are trying to figure out how aggressive the Fed will be, how high interest rates will go and what further damage could hit the equity markets. There are good arguments for at least a short-term bottom in stocks. There are also just as good arguments for further market declines. This push and pull within the markets are what is creating the daily volatility that may stick around for a few more months.

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The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable but are opinions and do not constitute a guarantee of present or future financial market conditions.

Program: Fox Now
Date: 6/3/2022
Station: Online
Time: 10:37AM

REPORTER: Unemployment is down a little and the price of gas is up a lot. So what’s that mean for the economy? It’s complicated.

There’s already early signs that inflation is peaking. But if you if you look at numbers such as the number of quits or outstanding jobs, jobs available, they are actually starting to peak and roll over.

REPORTER: Economists are worried because since the fifties, inflation over 4%, combined with unemployment under 5%, has meant the US economy was headed for a recession within two years. Inflation now stands at 8.3% and the May jobs report out Friday is expected to show the unemployment rate dipped to three and a half percent.

SCOTT MARTIN: The data in the economy is not awesome. It’s not really horrible. So I think we’ve got kind of a soft landing slowdown definitely upon us.

STEVE FORBES: When the Federal Reserve talks about a soft landing, you better put your seat along.

REPORTER: Drivers are looking for relief. The national average for a gallon of regular hit 4.72 on Thursday.

CONSUMER: Everything is sky high where I used to fill my tank for $50. Now it’s $80.

****

3:00

SVP Paul Nolte Interviewed on CBS News 6.6.22

U.S. braces for possible spike in inflation and recession

Despite the U.S. adding more jobs in May, many Americans fear a recession is on the horizon. Senior Vice President of Kingsview Investment Management Paul Nolte joins “CBS News Mornings” to discuss the latest.

Click here to watch to the interview.

Kingsview SVP Paul Nolte takes a deeper dive into oil, automobiles, retail sales slowing, inflation, and the raising of interest rates that will invert the yield curve.

Click here to listen to the interview.

3:00

SVP Paul Nolte Interviewed By Reuters 6.6.22

Reuters interviews Paul Nolte, SVP & Sr. Portfolio Manager

Kingsview SVP Paul Nolte discusses how the stock market rebound faces key inflation test

Click here for the full article

3:00

SVP Paul Nolte Interviewed on TD Ameritrade 6.3.22

Previewing The Employment Situation Report For May 2022

OPEC+ agrees to raise oil production by 684k barrels a day in July and August. Paul Nolte discusses this, highlighting movement in crude oil (/CL). He also previews the employment situation report for May 2022. He then talks about the impact of grains supply on prices. Tune in to find out more.

Click here to watch to the interview.

Kingsview SVP Paul Nolte takes a deeper dive into oil, automobiles, retail sales slowing, inflation, and the raising of interest rates that will invert the yield curve.

Click here to listen to the interview.

3:00

SVP Paul Nolte Interviewed on WGN Radio 6.2.22

Ilyce Glink fills in for Jon Hansen on Your Money Matters and she talks with Paul Nolte, Senior VP at Kingsview Wealth Management. The two discuss retirement and how Paul advises clients in preparation for a future recession. Plus, short-term bonds, stocks, and reinvesting.

Click here to listen to the interview.

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