Markets Were Calm in April, but Recession Fears Still Linger

by Sam McElroy, PsyD
CEO, STRIDE Financial

After a volatile March, April was a refreshingly quiet one for the financial markets. No more regional banks failed, and the Federal Reserve had no meetings. Therefore, investors could, and did, remain focused on positive economic data. Corporate earnings beat expectations and the inflation rate continued to fall. As a result, U.S. stocks, as measured by the S&P 500, finished the month up by about 1.6%.* Will all this calmness and cautious optimism continue, and if so, for how long?

The answer depends on several factors, but first, let’s take a closer look at April. While the labor market remained strong, the better-than-expected corporate earnings numbers for the first quarter were due largely to recent downgrades in estimates.** Meanwhile, inflation numbers released in April by the Bureau of Labor Statistics showed prices climbing 5% year-over-year for March, which was down from 6% in February. For the month the increase was just 0.1%, which marked the ninth straight month of easing price growth.* Extrapolating these figures forward means we’re already pretty close to the Fed’s target inflation rate of 2%, although not quite there yet.

All of this made investors confident the Fed would stick to their plan to raise short-term rates by no more than another quarter percent at their early May meeting. The Fed not only stuck to that plan, but they also signaled they would probably pause rate hiking altogether at their next meeting in June. Why? Well, despite the positive data, there are still concerns among investors and economists that conditions are right for a recession later this year.

Inverted Yield Curve
Remember, one of the classic warning signs of a recession is an inverted yield curve, which occurs when short-term interest rates are higher than long-term rates. Until recently, the bond market was accommodating the Fed’s rate hiking program, and long-term rates had risen ahead of each of the Fed’s rate increases. Last year, long-term rates were pushed to their highest level in 16 years. But for most of this year, the bond market has been pushing back against the Fed. Although the Fed’s benchmark short-term rate is now roughly 5.1%, the interest rate on the 10-year government bond has fallen from 4.06% in early March to 3.43% as of early May.**

In other words, the Fed knows they can’t continue inverting the yield curve further, which makes a rate hike pause in June very likely. At the same time, however, they want to continue talking tough about inflation and are reluctant to proclaim “mission accomplished” and announce the end of rate-hiking altogether. Still, they’ll have little choice in the matter if the economy tips into recession. It’s likely they would even have to start lowering rates again to fight the recession, which, of course, they now have plenty of ammunition to do.

All of this is why we continue to believe that if a recession does hit, it will be a mild one that doesn’t last long. As we have said before, you can think of it like a controlled burn conducted by the fire department. A recession is always a danger when the Fed is raising rates, but because the Fed causes it, they also have some control over it — which isn’t necessarily the case when a recession is caused by a major economic crisis.

The Lag Period
So, when will we know the answer to the recession question? Probably sometime in the coming months once the lag period between all the Fed’s rate hikes and their full impact on the economy is over. It always takes time for the effects of higher borrowing costs to ripple through the economy. Once that happens, will it slow things down enough to start a recession? If so, we could see the markets sink further before the Fed starts lowering rates again, which would likely trigger a market rebound. If, on the other hand, it appears the Fed has managed to bring down inflation without triggering a recession and is finally finished raising rates, then we could see the markets get back to a more normal, less volatile pattern and potentially reach new highs.

In the meantime, you can continue taking comfort in knowing your interest and dividend return will remain consistent no matter what happens. You will see this again reflected in your latest monthly statement, and most of you will also see that your account values were also slightly higher for the month. Of course, as we frequently point out, while a rebound in values is always nice to see, it’s also largely irrelevant when you’re investing for income — just as any drop in value is also irrelevant because it doesn’t affect your income return. As a caveat to this statement, we are speaking primarily to those of you approaching or in retirement; growth-based strategies may be very appropriate for investors who have longer time horizons prior to retirement.

Keep this in mind going forward because these fluctuations are likely to continue, perhaps for the rest of the year, based on all the factors we just discussed. The good news is that with the Fed likely at or near the end of its rate hiking, the worst is probably over in terms of bond market headwinds, and we could even start enjoying some consistent tailwinds in the near future.

*“US Equities market Attributes, April 2023,” spglobal.com, May 2, 2023
**Nasdaq.com, May 2, 2023
***“Inflation Cooled to 5% in Marcy but Consumer Pain is Set to Linger,” CNBC, April 12, 2023
****MarketWatch.com

Investment Advisory Services offered through STRIDE Investments, LLC, an SEC Registered Investment Advisory Firm

Markets End March Flat Despite Volatility Around Bank Failures

by Sam McElroy, PsyD
CEO, STRIDE Financial

March was another active month for the financial markets but, in the end, everything ended up just about where it started. As usual, the mid-month volatility stemmed mainly from questions over whether the Federal Reserve would approve another short-term interest rate hike at their March meeting and, if so, how big a hike. The markets are always volatile ahead of a Fed meeting when the Fed is raising rates, but investors were more worried than usual this time around. Their increased fear stemmed from two high-profile regional bank failures earlier in the month, which triggered waves of media speculation about the possibility of another systemic banking crisis on par with 2008. Were these bank failures isolated incidents or warning signs?

We will talk more about that shortly, but let’s take a closer look at the markets first. After a bad February, the S&P 500 was back to just over 4,000 by March 3, and it ended the month just slightly higher. In between, though, it had sunk to 3,855, its lowest level of the year so far.* That was on March 13, about 10 days ahead of the Fed’s next policy meeting, and three days after news broke that Silicon Valley Bank in California had collapsed. While the markets were still processing that news, on March 20 it was announced that Signature Bank in New York had also failed.

It’s not surprising the collapse of any bank would shake up the markets and worry everyday investors. The very term “bank failure” is synonymous with the Financial Crisis, which occurred only 15 years ago. But by the time March ended, much of the fear on Wall Street had subsided, and rightly so. It helped that Fed Chairman Jerome Powell took a more dovish and reassuring tone than usual at the March meeting and raised rates by only another .25%, which was expected. It also helped that the Fed, FDIC, and Treasury Department had already taken action to protect depositors at Silicon Valley Bank, suggesting that those same measures would be taken if other banks should fail in the future. They later took steps to cover Signature Bank depositors as well.** None of this quite amounted to an admission of guilt by the Fed for causing these bank failures, but it might as well have been because they were the cause.

Snowball Effect
Unlike during the Financial Crisis, the bank failures in March weren’t caused by bank customers defaulting on their loans. Instead, they were directly related to the Fed aggressively raising short-term interest rates to fight inflation, which they began doing over a year ago. Raising rates can affect banks in two ways. One involves the yield curve. Banks need a positive sloping yield curve to be profitable, meaning they need long-term rates to be higher than short-term rates. That’s because their profit comes from something called net interest margin, which is determined by the difference between the interest rate they pay to depositors and the rate they charge to lend money. When the Fed raises rates aggressively as they have been, banks must pay more to their depositors over time but they can’t raise the fixed interest rates on the loans in their books. This compresses their net interest margin, and it becomes cost prohibitive for them to lend money.

So, that’s one problem caused by the Fed, but another is that when interest rates go up, bond values go down, and that includes the values on any government bonds, mortgages, or other such securities held by a bank. In theory, this shouldn’t affect banks because they don’t have to account for these bonds and mortgages at market value the way traders and other financial institutions do. Banks can just hold the maturity value on their books. However, if depositors get nervous about these falling values and start pulling their money out, that can lead to panic and a run on the bank. That creates a snowball effect where the bank must start selling their bonds and mortgages at a loss, and when that happens the bank’s collapse is almost inevitable.

This second scenario is exactly what happened at Silicon Valley and Signature Banks. These failures were 100% Fed-induced. Larger banks have not been affected in the same way because they’re more flexible than regional banks and have more ways of making revenue. Regional banks are more limited and therefore more vulnerable in these kinds of situations.

No Cause for Panic
With that said, we do not think there is much cause for anyone to worry about a full-blown regional banking crisis, and we say that for three reasons. First, the FDIC coverage limit for depositors is $250,000 per bank, and most people are smart enough not to have more than that deposited in any one bank. Second, as we already mentioned, the Fed quickly taking action to protect depositors at Silicon Valley and Signature banks — including those over the FDIC limit — is an implicit guarantee that they’ll do the same for other banks that may fail. And third, because the Fed created this problem they are uniquely well-positioned to control and fix it. It’s the same reason we are not too concerned about the possibility of a recession later this year. If a recession does hit (which we still think is likely), it will be a recession caused by the Fed, not economic fundamentals, which are still relatively strong. And since the Fed now has plenty of ammo to combat a recession by lowering short-term interest rates again, we are confident any recession would be minor and short-lived.

So, once again, despite all the drama and volatility surrounding the bank failures, March ended up being fairly flat for the markets, with most indexes ending the month close to where they started it. Most of you will see this “flatness” reflected in your portfolio statements this month. Depending on your holdings, you might find your values down by a half-percent or one percent, or maybe up by about that same amount. Year-to-date — after a good January, a bad February, and a flat March — most of you (again, depending on your specific allocation) should find yourself up by about 4% on average. And, of course, as we always point out, these temporary value fluctuations on paper don’t matter because your interest and dividend return, your income, has remained consistent through all this turmoil, and will continue to do so! As a caveat to this statement, we are speaking primarily to those of you approaching or in retirement; growth-based strategies may be very appropriate for investors who have longer time horizons prior to retirement.

As always, we encourage you to call our office if you have any questions or concerns about your statements — or for any reason, such as a change in your goals or situation. Keep in mind that if your goals or needs ever do change, we should talk about it to help determine if your investment strategy should be adjusted in any way to align with the change!

*MarketWatch.com
**“SVB, Signature Bank Depositors to Get all Their Money as Fed Moves to Stem Crisis,” Wall Street Journal, March 13, 2023

Investment Advisory Services offered through STRIDE Investments, LLC, an SEC Registered Investment Advisory Firm

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STRIDE Financial is a full service financial services brokerage specializing in comprehensive, holistic financial planning, and offers a complete line of financial services and products for families and businesses – including retirement planning, college planning, estate planning, business planning, life insurance; annuities; health insurance; property and casualty insurance; long term care insurance; disability insurance; and investment advisory services. This market commentary is for informational purposes only and is not intended to be a solicitation, offering, or recommendation of any security. Although this market commentary may include investment-related information or opinions from its presenters, you should not consider anything you find in this presentation to be a recommendation that you buy, sell, hold or otherwise invest in an individual security, or any other investment or asset. This market commentary does not intend to provide investment, tax, or legal advice. Investment Advisory services are offered by STRIDE Investments, LLC. Additionally, STRIDE Investments does not represent that any securities, products or services discussed in this market commentary are suitable or appropriate for all investors. 

Last Year’s Up-Down Market Pattern Continues into February

by Sam McElroy, PsyD
CEO, STRIDE Financial

While January was a good month overall for the financial markets, February was more of a mixed bag. Although the stock market finished the month with losses, the pullback was fairly minor considering the fact that long-term interest rates took a big jump. What did it all mean for your portfolios, and what can we expect for the months ahead?

Before we get to those questions, let’s take a closer look at what happened in February. Again, after a strong January, Wall Street slipped in February, and all three major indexes finished the month in the red. The Dow ended February down 4.2%, while the S&P 500 fell by 2.6% and the Nasdaq by 1.1%.* Meanwhile, even though the Federal Reserve made good on their promise to only raise short-term interest rates by a quarter-percent at their February meeting, long-term rates nevertheless spiked during the month. The interest rate on the 10-year government bond rose from 3.42% on Feb. 1 to 3.99% by March 1.**

All of this occurred after a January in which the stock market rose by some 6.5% and long-term interest rates fell by about 0.3%. Why the reversal of fortune, and why the disconnect between the big spike in interest rates and the fairly minor pullback for the stock market?

Let’s start with the first question because the answer is easy: the Fed. As we have discussed many times, whenever the Federal Reserve is actively raising short-term interest rates, the markets tend to be volatile. They’re up one month then down the next. We saw this pattern throughout 2022, from the beginning of the year when the Fed first announced they intended to raise rates to fight inflation, all the way to the end of December.

Although the Fed has slowed its pace and is nearing the end of its rate-hiking schedule, they are still actively raising rates, so it’s no surprise that this up-down pattern for the stock market is still going. The Fed has slowed down mainly because inflation also slowed down consistently for the last six months of 2022 before edging back up just slightly in January of this year.

Strong Data
Ironically, the reason the stock market didn’t see a bigger pullback in February probably has a lot to do with the fact that inflation is, as of now, still higher than normal. Remember, inflation comes from too much demand chasing too few goods and services. The whole idea behind raising short-term rates is to try to decrease demand by raising borrowing costs. Although we’re seeing some signs that the strategy is working, the bottom line is that demand remains high, which is a sign the economy is fairly strong. And it’s not the only sign.

In January, the U.S. unemployment rate fell to 3.4%, beating estimates and hitting a 53-year low.*** The strong job data came on the heels of news that GDP growth for the fourth quarter of 2022 was a healthy 2.9%. Add all this to the fact that the Fed is slowing down and nearing the end of their rate hike schedule, and it probably explains why the stock market ended February with only a minor pullback even though long-term interest rates spiked by over half a percent.

Still, it was a pullback which means that, despite all the positive data, investors remain somewhat concerned about the potential of a recession hitting sometime this year. Although recession fears have ebbed since last year, many analysts believe a sharp economic downturn could still happen in 2023. We also still believe a recession is likely, given that the Fed’s historic record for achieving a “soft landing” when raising rates is not great. But, as we have also said before, we think that if a recession does occur it will be relatively minor and brief.

Your Portfolios
And speaking of minor, just as the impact of February’s interest rate spike was fairly minor in terms of the stock market, it was also minor in terms of your portfolios. At the end of January, most of you saw your values up by 7-8% on average, depending on your holdings, and—as you might recall — we noted in last month’s newsletter there was a good chance we’d give some of that back, given that the Fed was still raising rates. And in February we did give some of it back, but only about 2-2.5% on average, which means most of you are still up by about 5% for the year.

Psychologically that’s good, but, of course, as we always point out, regardless of whether the values of the bonds and bond-like instruments in your portfolios go up or down (as they likely will continue to do for a while yet), it’s largely irrelevant when you’re investing for income. The most important point is that your interest-and-dividend return has remained consistent and that you can continue to count on that consistency no matter what the markets do from one month to the next.

As always, be sure to contact our office if you have any questions about your statements or any other questions or concerns at all. In the meantime, Think Spring!

*“Dow Erases 2023 Gains as Stocks Finish February in the Red,” MarketWatch, Feb. 28, 2023
**MarketWatch.com
***“Jobs Report Shows Increase of 517,000 in January as Unemployment Rate Hits 53-Year Low,” CNBC, Feb. 3, 2023

Investment Advisory Services offered through STRIDE Financial, LLC, an SEC Registered Investment Advisory Firm.

A More Dovish Fed Made the Markets Happy in January

by Sam McElroy, PsyD
CEO, STRIDE Financial

The first month of the New Year was a good one for the financial markets, thanks largely to the Federal Reserve. In December, the Fed slowed down its schedule for raising short-term interest rates and said they would likely slow down even more at their next meeting in February. Some positive economic news made investors optimistic the Fed would keep its word, and it all resulted in a positive month in the markets. Will the positivity continue—and if so for how long?

As you know, the Fed began raising short-term rates at a rapid pace in early 2022 to try to reign in rising inflation. That rapid pace kept downward pressure on the stock market all year and pushed long-term interest rates up to their highest levels in 13 years. The Fed only began slowing down after inflation had shown signs of slowing for five straight months, starting last July. In addition to raising short-term rates by only a half-percent in December (after having raised them by three quarters of a percent four times in a row) the Fed also strongly indicated they would probably enact an even smaller, one-quarter percent increase at their next meeting in February.

The Fed’s words were bolstered by some positive economic data released in January. Inflation, as measured by the Consumer Price Index, slowed yet again in December, falling by 0.1% for the month,* and economic growth measured a healthy 2.9% for the fourth quarter.** With all that, investors priced in a 100% chance that the Fed would stick to its plan for only a quarter percent rate hike in February, and they were right. As a result, the S&P 500 finished January up by 6.2% for the month.* At the same time, long-term interest rates also ticked downward, with the rate on the 10-year government bond dropping from about 3.8% at the start of January to 3.5% by the end.**

Recession Still a Concern
The Fed’s more dovish tone and actions made investors happy for two reasons. The first is that falling interest rates have a positive effect on the value of all financial assets, just as rising rates have a negative effect. Remember, the market doesn’t value stocks and bonds based on where rates are now but on where it believes rates are heading. So, if investors think rates are going to rise, the market typically sinks, and if they think rates are going to stabilize or fall, the market rises.

The second reason investors were so optimistic in January is that, with the Fed slowing and nearing their target level for short-term rates — which is right around 5% — the chances are diminished that we’ll see a recession in 2023. Many economists are still forecasting a recession this year, and we agree there is probably still a 50/50 chance it could happen. But those odds would increase greatly if the Fed were still committed to raising rates at an aggressive pace rather than slowing down and nearing the finish line. What’s more, if a recession does occur, they now have plenty of ammunition to combat it by lowering short-term rates again — which they didn’t have a year ago when short-term rates were still near zero. That means even if we do get a recession, it isn’t likely to be a very long or painful one.

Your Portfolios
As noted, the S&P 500 finished January up by 6.2% for the month, and long-term interest rates notched downward a bit. As a result, both our stock and bond portfolios finished the month up by a level commensurate with the stock market — just over 6% on average, depending on your individual holdings. That means if you saw your values down on paper by around 12-to-13% for 2022, you regained about half of those losses back in January.

Now, could we give some of those gains back again in the coming months? Of course. Although January was a good month and the markets are optimistic for now, the fact is the Fed hasn’t reached the finish line quite yet. Until they do, the markets are likely to remain in a pattern similar to what we saw throughout 2022: up one month and down the next. That’s just typical whenever the Fed is raising rates. And even after they have finished, the recession question could keep investors on edge for a while longer, in addition to other potential concerns like the looming showdown in Washington over the debt ceiling.

With all that said, we are still optimistic — as we said last month — that calmer seas are on the horizon, and we will return to a more normal market cycle by the end of 2023. In the meantime – if you are in or near retirement – you can continue taking comfort in knowing you remain well-equipped to ride out the rough seas because you decided to shift your financial focus from total return to income. In other words, whether your statements are up or down from one month to the next doesn’t really matter because you know your income return is unaffected and the face value of your investment is protected regardless of any fluctuations in value on paper.

As always, we encourage you to call our office if you have any questions or concerns about your statements — or for any reason, such as a change in your goals or situation. Keep in mind that if your goals or needs ever do change, we should talk about it to help determine if your investment strategy should be adjusted in any way to align with the change!

*“Dow Closes 350 Points Higher, S&P Caps Best January in Four Years,” CNBC.com, Jan. 30, 2023
**Bureau of Labor Statistics
***“US GDP Rose 2.9% in the Fourth Quarter, More Than Expected,” CNBC.com, Jan. 26, 2023
****YCharts.com

Investment Advisory Services offered through STRIDE Financial, LLC, an SEC Registered Investment Advisory Firm

The New Year Brings Cause for Optimism and Appreciation

by Sam McElroy, PsyD
CEO, STRIDE Financial

Happy New Year! And here’s hoping it will be a happier one for the financial markets, which struggled throughout 2022 thanks mainly to the Federal Reserve. The Fed’s effort to tame inflation by raising short-term interest rates kept downward pressure on the stock market and pushed longterm interest rates up to their highest levels since before the Financial Crisis. Market volatility was also high, with stock values rising and falling from month to month in a pattern that continued straight to the end of the year. The good news is that the Fed is winding down its rate hike program, meaning we should return to a more normal market cycle sometime in 2023.

As you probably know, the Fed did raise short-term interest rates again in December, but only by a half-percent. At their four previous policy meetings, the Fed had raised rates three quarters of a percent. Those bigger rate hikes in such fast succession kept investors worried all year that the Fed might tip the economy into a recessionary spiral. That fear hasn’t entirely gone away, which is one reason why the stock market sank again in December after enjoying a strong November. When all was said and done, 2022 ended up being Wall Street’s worst year since 2008. The S&P 500 ended the year down by almost 20%, while the Nasdaq finished 33.1% in the red.*

As noted, the Fed’s hawkishness caused just as much turmoil in the bond market and pushed longterm interest rates up to their highest levels in over a decade. The interest rate on a 10-year government bond started 2022 at 1.51% and ended the year at around 3.8%.** In other words, long-term rates more than doubled, and — as Warren Buffett famously said — rising interest rates decrease the value of all assets. Some of the strongest interest rate headwinds last year were felt by bond investors. But, once again, with the Fed winding down its efforts, we should start to see those headwinds diminish in the coming months.

The Inflation Factor
The main reason the Fed approved a smaller rate hike in December (and has said their next increase may be even smaller) is that inflation has consistently shown signs of slowing since about mid 2022. Although the year-over-year rate is still over 7%, from July through November the month-to-month increase was consistently less than 1%.*** As we pointed out in last month’s newsletter, if you extrapolate those figures over 12 months it suggests we’re already back down to an annualized inflation rate of just 3% — which is close to what is considered “normal.”

Nevertheless, as we also pointed out last month, the Fed is likely to continue raising rates in smaller increments for a while yet despite these positive signs. As a result, we’ll probably continue to see the markets rise and fall from month to month for at least the first quarter of 2023 and possibly beyond. Keep in mind, too, that many economists are still predicting a recession to hit at some point in the coming year. While we agree a recession is still possible, as we have said before, we don’t think it will be a very severe or long one if it does hit. As we have also pointed out, we think one of the reasons the Fed is continuing to raise short-term rates now is so they will have plenty of ammunition to fight a recession by lowering rates again — just as they did in 2019.

We mention 2019 to make the point, again, that the headwinds and volatility we experienced in 2022 were nothing new. The markets struggled similarly in 2018 and have endured even worse struggles many times over the years. As we have shared with many of our clients, this is one of the tenets we formed our practice on – to ensure our clients receive sustainable income in retirement. We wanted to focus on strategies designed to help our clients protect their money in all market conditions while earning consistent, reliable income. We are pleased to say we accomplished that goal yet again in 2022.

Your Portfolios
As for your portfolios, we will start with the best news first. Despite the stock market ending the year down by about 20%-to-33%, as noted, those in our stock dividend portfolios ended 2022 up by about 4% on total return, and with a dividend yield of about 4.5%.

As for those of you in our more conservative portfolios of bonds and bond-like instruments, your year-end statements will likely show your overall values (depending on your individual holdings) down by about half or less than half of the market’s decline, and with a much higher income yield. The important thing to remember, of course, as we always point out, is that in these types of portfolios, any loss is really just a paper loss. That’s because most of these instruments have a par value that doesn’t change and that you’ll get back if you hold the investment to maturity — and provided there is no default by the issuer. In the meantime, of course, you can continue counting on getting your interest and dividend return at a fixed rate regardless of any temporary changes in your values.

Compare all that to where you might be to start the New Year if you were still invested heavily or entirely in growth stocks and mutual funds. Many of those investors ended 2022 with individual losses equal to the market overall, in the 20%-to-33% range. And despite how some growth-based advisors might try to spin it, those aren’t paper losses; they’re real losses for the investors because those instruments do not have a par value that never changes. As a caveat to this statement, we are speaking primarily to those of you approaching or in retirement; growth-based strategies may be very appropriate for investors who have longer time horizons prior to retirement.

So, once again, we think we can expect the Wall Street rollercoaster to continue rolling and the interest rate headwinds to continue blowing for a while yet in the New Year — at least until the Fed has finished raising rates and the recession question becomes a bit clearer. Until that time, you can continue to take comfort in knowing you’re well-positioned to handle this storm no matter how long it may last, as well as any new storm the coming year may bring!

*“Stocks Fall to End Wall Street’s Worst Year Since 2008,” CNBC, Dec. 30, 2022
**CNBC.com
***US Bureau of Labor Statistics

Investment Advisory Services offered through STRIDE Financial, LLC, an SEC Registered Investment Advisory Firm

Give Thanks for a Good November, but Don’t Get Too Excited Yet

by Sam McElroy
CEO, STRIDE Financial

Fittingly, the month of Thanksgiving gave consumers and investors several things to be thankful for. Inflation continued showing signs of slowing, long-term interest rates came down and the stock mark finished November up for the month. You’ll see all this good news reflected in your latest portfolio statements—as we will discuss further in this newsletter. We will also talk about what December may hold in store. Will it be a nice present or a lump of coal? With this market, anything is possible.

Let’s start with inflation, which has been the key driver of market volatility all year. Investors have been closely watching the inflation rate from month to month and trying to anticipate the Federal Reserve’s reaction to it. As you know, the Fed has been rapidly raising short-term interest rates all year to try to tame inflation, which has reached its highest level in 40 years. The good news is that the monthly inflation increase for October was less than expected: 0.4% as measured by the Consumer Price Index. The even better news is that inflation was also lower than expected — just 0.2% — as measured by the Producer Price Index.*

Why is that such a big deal? It’s because the PPI tracks the cost of raw materials manufacturers buy to make all the products purchased by consumers. If the inflation rate for manufacturers is slowing even more rapidly than it is for consumers, it’s an indication consumer costs will also come down further in three to six months when the products being built now finally hit store shelves. In other words, the PPI is a good forward indicator that inflation is slowing.

Fed Gets the Message

The good news continued when Fed Chairman Jerome Powell spoke on November 30 and repeated a statement he first made in October, saying the Fed is likely to start slowing their rate hike pace at their next meeting. That meeting was scheduled for December 14, and Powell’s statement meant that the Fed probably wouldn’t approve another 0.75% rate increase (as they have at their last four meetings) but will go with a smaller rate hike this time. This foreshadowing ultimately came to fruition as the Fed approved a 0.50% rate hike on December 14. This suggests the Fed is starting to get the message that inflation is, indeed, slowing down. Although the media likes to use the year-over-year inflation rate of 7.7% (which is about three times higher than the so-called “normal” rate of 2-3%), from month-to-month since July, the rate has risen by 0.0%, 0.1%, 0.4%, and 0.4% respectively.** Altogether that’s still less than 1%, and if you extrapolate those figures over 12 months it suggests we’re already back down to an annualized inflation rate of just 3%.

Still, the Fed isn’t likely to fully press the brakes for a while yet — not until they’ve raised short-term rates by another 1.25%, according to Chairman Powell’s latest statement. But at least they’ll be moving toward that goal more slowly now, and the markets were happy to hear that message reaffirmed. As a result, the stock market, as measured by the S&P 500, finished November up about 5.8% for the month, and long-term interest rates saw a healthy drop.* The yield on the 10-year government bond, which has been rising most of the year ahead of the Fed’s short-term rate hikes, fell from just over 4% to 3.6% to finish the month.* Across the board, investors celebrated the Fed’s more dovish tone because its aggressive rate-hiking all year has fueled fears of a recession and negatively affected all asset values, as rising interest rates always do. Although many still believe a recession is likely to hit sometime next year, investors seem optimistic for now that even if one does hit, it’s not likely to be major or prolonged. In fact, part of the Fed’s strategy in continuing to raise rates now is probably to give them plenty of ammunition to lower rates again if and when a recession does occur.

Your Statements

As always, you’ll see all these developments from November reflected in your latest portfolio statements. If your holdings are all or mostly income-oriented instruments, for the second month in a row you’ll see some recovery in your values. Depending on your holdings, you should be up about 5% for the month. That’s good news, but the even better news, of course, is that any gains or losses in value in these portfolios are largely irrelevant because your interest and dividend return has been, and remains, consistent at about 6% for most of you. By comparison, the interest and dividend yield on a traditional income portfolio as measured by the US Aggregate Bond Index right now is about 2.6% on average, and the value on that index is down about 2% more than our typical income portfolio. So, not only are most of you beating the index on performance, but you’re also doing it with a much higher income yield!

Meanwhile, those of you in our stock dividend strategies will see your portfolios up by about 7% on the year after November. By comparison, the S&P 500 index is still down by nearly 15% year-to-date, which means these strategies are outperforming their market index by about 22%, and they’re doing so with a much higher average dividend yield of about 4.25% before fees. (These are median numbers based on the total portfolio holdings and yours might be slightly different depending on your allocation and risk tolerance. For example, those of you with higher risk-tolerances and longer time horizons may be tracking closer to the S&P 500 numbers.)

So, again, November gave us some things to be thankful for — and it’s perfectly okay to be thankful, but we would caution you against getting too excited or too complacent. Once again, the possibility of a recession remains very real, and even though the Fed is striking a more dovish tone now. Jerome Powell might end up being Santa Claus, but he could just as easily be the Grinch! The bottom line is that the markets have been stormy all year, and that trend probably isn’t over yet despite the last two relatively calmer months. So, stay alert, stay informed, and take comfort in knowing you’re in the hands of a team that has successfully navigated many storms in the past!

As always, call our office with any questions, and have a safe, happy holiday season!

Investment Advisory Services offered through STRIDE Financial, LLC, an SEC Registered Investment Advisory Firm

*“Slower Producer Price Growth Adds to Improving Inflation Outlook,” Reuters, Nov. 15, 2022
**bls.gov/CPI
*** “US Equity Market Attributes,” sbcglobal.com, Dec. 4, 2022
****Marketwatch.com
*****Bloomberg.com

Fed Delivers Mixed Message for the Markets at Latest Meeting

by Sam McElroy, PsyD
CEO, STRIDE Financial

On November 2, the Federal Reserve met and raised short-term interest rates by three-quarters of a percent for the fourth time this year. Although the latest big increase was expected, the stock market still experienced a sell-off following the meeting in reaction to one of Chairman Jerome Powell’s comments.* Overall, the Fed’s latest meeting was a mix of good news and bad news, but for the most part, the good outweighed the bad.

One good outcome of the meeting is that the Fed said they plan to slow the pace of rate increases moving forward, possibly starting at their next meeting in December. That came as welcome news to the financial markets, which have been volatile ever since the Fed began rapidly raising short-term rates early this year to fight inflation. The hikes have brought the Fed’s benchmark short-term rate up from near-zero at the beginning of the year to a range of 3.75 and 4% currently. This rapid pace has kept the stock market down from its early-year highs (by as much as 25% in September), pushed long-term interest rates up to their highest level since 2007, and sent mortgage rates up from around 3% at the start of the year to just over 7% today.

Investors and many economists feel the Fed has been moving too quickly to try to make up for lost time after ignoring rising inflation completely in 2021. The problem with raising rates so fast is that the Fed is not giving one rate hike enough time to take effect before implementing another. As a result, it’s possible they’ve increased rates by too much already, and the effect will be a recessionary spiral that kicks in sometime next year. That’s why Chairman Powell’s vow to start slowing the pace was good news to investors, but it was followed by some bad news.

Aiming Higher
The bad news is that the Fed also said their target number for short-term rates is now higher than originally planned. At an earlier policy meeting, the Fed said they planned to bump up rates by only an additional three-quarters of a percent. Now they’re saying they may increase them by 1.25%, which could take short-term rates up over 5%.** That’s the news that triggered another selloff on Wall Street because—as we often discuss—higher or rising interest rates decrease the value of all assets and put downward pressure on the markets in a variety of ways.

But there’s more good news if you do some simple math. That’s because even if the Fed does keep raising by another 1.25%, at least the worst is over in terms of what they’ve done already, and the end of their rate-hiking program is now in sight. With a slower schedule, it’s hard to say how many more meetings it will take for the Fed to reach its goal, but it’s safe to say it will likely happen sometime in 2023.

Of course, a lot will also depend on what happens when the economic effects of the rate hikes they’ve already approved really do kick in. As we noted earlier, there’s a good chance the Fed has already overshot and set the stage for an inevitable recessionary spiral. Many economists are still forecasting a recession for next year, although there is a lot of debate over when it will kick in and how bad it will be. The Fed’s commitment to slowing its pace could help soften the severity of any recession, and, of course, they also have the potential power to limit its duration by progressively lowering short-term rates again — just like they did in 2019.

Although the Fed insists they aren’t trying to create a recession, they are trying to slow economic growth by decreasing demand — but just enough to bring inflation down from its current 40-year high of over 8% to its “normal” level, which is about 2%. So even if a full-fledged recession does begin, it’s important to remember the Fed is the driving force behind it, and as such, they will maintain a level of control over it. As we noted last month, the situation is a bit like the fire department conducting a controlled burn. The fire will still look scary, but not as scary as one started by accident and with the fire department nowhere in sight!

More Good News
As for now, the economy remains fairly stable by many measures despite high inflation and increasing signs of slowing growth. And after a very volatile September, the markets rebounded in October, and you should see that rebound reflected in your latest portfolio statements. Our income accounts ended October up by an average of 2-to-3% for the month (depending on your holdings), and our stock portfolios finished the month up about 6% on average. Of course, just as we always remind you when your holdings drop in value, it doesn’t matter much because your interest and dividend income hasn’t changed — or it has potentially increased if you’ve been reinvesting dividends.

There’s no doubt these are crazy times, with the markets seeming at times to celebrate bad news and panic over good news as investors try to figure things out. But none of it is unprecedented. This same kind of craziness always occurs when the Fed is fiddling with interest, and we’ve lived through it many times before, as recently as 2018. As the craziness continues, the value of your investments will probably continue to fluctuate from month to month on paper but again, that really doesn’t matter with your strategy because “it’s all about the income”!

Have a Happy Thanksgiving and, as always, call our office any time if you have any questions or concerns!

Investment Advisory Services offered through STRIDE Financial, LLC, an SEC Registered Investment Advisory Firm

*“Stocks Slide as Fed Leaves Investors Unsure About Path Ahead,” New York Times, Nov. 3,
2022
**“10-Year Treasury Yield Turns Higher After Fed Says Rates Will Go Higher Than Expected,”
Nov. 2, 2022

Market Commentary: Now is the Time for Income Investors to Be Grateful & Confident

by Sam McElroy, CEO
STRIDE Financial

The markets went a little crazy in late August then went crazier in September. The stock market tumbled, and long-term interest rates jumped higher. This all occurred even though gas prices continued to decline, and the economy remained — by many measures — reasonably strong. Does it make sense? No, but there are reasons for all this craziness — and even more reasons for income investors in or near retirement to be grateful and optimistic.

The craziness really started near the end of August when Federal Reserve Chairman Jerome Powell reinforced the Fed’s commitment to raising short-term interest rates to combat inflation. Then came the August inflation report, which showed prices creeping back up by 0.1%. That’s only a tiny fraction more than economists were predicting, and one could argue it shows that inflation is slowing down on its own. But investors knew the Fed would still likely use it as an excuse to move forward with another three-quarter percent rate hike at their September meeting, and ultimately the Fed did just that. As a result, the stock market fell further, and long-term interest rates notched higher. Wall Street ended September with the market overall down around 25% for the year.* The interest rate on the 10-year government bond, meanwhile, went from 3.26% at the start of the month to 3.80% at the end.**

The Fed’s benchmark short-term rate is now at a range of 3-to-3.25%, and Chairman Powell has said he wants to get it another 1.5% higher with at least two more rate hikes. We are skeptical he’ll be able to do that for reasons we’ll explain later. For now, though, the Fed’s hawkishness remains the driving force behind all the markets’ crazy volatility. Behind all the craziness, the economy remains relatively strong by many measures. Consumer spending hasn’t plummeted despite an inflation rate of 8.3%, and unemployment remains low — although there are some signs the economy is getting weaker.

A ‘Controlled Burn’

The important thing to understand about all this is that because the Fed is creating the chaos, it means they also have some control over it. You might think of it as a controlled burn conducted by the fire department. If your neighbor came into your house and set a chair on fire, you’d probably panic, knowing the fire could easily spread. If the fire department came in and did the same thing, you wouldn’t like it, but you’d at least have some confidence they could quickly contain the fire. It’s a similar situation now with the Fed and the financial markets. We share this to give you confidence that — for as crazy as things seem — the situation isn’t nearly as scary as it might be if banks were struggling, unemployment was soaring, or some other fundamental economic force was driving the volatility. This isn’t to say this volatility isn’t having a real impact on all investors because it is, and it may continue to do so for a while. But that’s what you should be most confident and grateful about as either an investor whose primary focus is income or an investor who has a long time horizon and can wait out the volatility – because the impacts most of you are feeling aren’t nearly as severe as those hitting many investors who are in or near retirement and still focused on growth.

Interestingly, some advisors who only focus on growth will try to calm their clients by telling them when their growth stocks are down, it’s only a paper loss. For people in or near retirement we would argue that’s not true because those stocks have no par value, which means you can’t really be sure you’ll ever recover your principal investment when you have a shorter time horizon. That’s why we always remind you that, as income investors, when your bonds and bond-like instruments drop in value, it really is a paper loss because those instruments do have a par value that never changes. You may have invested $100 in a bond that’s now worth $92 because long-term interest rates have risen, but if you hold the bond until it matures you can be sure you’ll get that $100 back at a minimum, assuming there have been no defaults. It works the same way with preferred stock and other bond-like instruments that have a par value. And most importantly (as we also always remind you) the dollar amount of your income doesn’t change in the meantime. It stays the same regardless of any temporary fluctuation in values. Even better, if you’re not spending all your income and you’re reinvesting it in this market, your future income is going to grow faster. That’s because, with values down, you’re reinvesting at bargain rates. Instead of paying $100 for that bond, you’re getting it for $92, so your future income will go up faster!

A Time to Be Grateful

These are just some of the reasons why today’s market chaos should not only not keep you up at night, but it should make those of you in or near retirement especially grateful that you made the transition from growth to income. These are exactly the kinds of market challenges your income strategy is designed to tackle! Imagine still having all your money invested for growth and being down 25% in your portfolio with no assurance you’ll ever get those losses back prior to taking withdrawals for income of Required Minimum Distributions. Even if you have a percentage of your money in our stock dividend strategies, you’re still doing much better now than many of those growth-based investors. Our stock strategies are still beating the markets by a wide margin: down just 5-to-6% on average compared to 25% and with a dividend yield of almost 5%.

Hopefully, all of this has helped shed some light on today’s market craziness, which may or may not get crazier before things calm down. As you may know, England’s Central Back, which had also been raising short-term rates, recently had to change course and start lowering them again. There were several reasons for this, but ultimately it wasn’t much different from what happened here in 2018 when our Fed had to quickly switch from raising to lowering rates due to economic forces. That’s why we said earlier we’re skeptical Jerome Powell will be able to raise rates another 1.5% like he’s hoping. We think the markets — which have been reluctantly accommodating the Fed so far — will push back before he can achieve that goal. When it happens, we think it will be a good thing because, while the Fed’s plan is well-intentioned, it’s also short-sighted. They aren’t waiting nearly long enough to gauge the impact of one rate hike before implementing another, which puts them in danger of overcorrecting the inflation problem and making matters worse. If they don’t realize this before it’s too late, we are confident the markets will, and will force the Fed to quickly contain their fire. In the meantime — again — for those of you in or near retirement, be glad you are investing for income! And for those of you with a longer time horizon, now may be a good opportunity to increase your contributions and ‘dollar cost average’ into the volatility.

*“Stocks Surge as Wall Street Crawls Out of Brutal September,” Yahoo News, Oct. 3, 2022 **MarketWatch

Investment Advisory Services offered through STRIDE Financial, LLC, an SEC Registered Investment Advisory Firm

Market Commentary: Fed’s Verbosity is Working Again, but it Has Limitations

by Sam McElroy, PsyD
CEO, STRIDE Financial

July’s market recovery continued for most of August, but then came Jackson Hole. That’s Jackson Hole, Wyoming, the site of the Federal Reserve’s annual symposium, which took place August 25-27. Fed Chairman Jerome Powell used the meeting as an opportunity to “jawbone” the markets into accommodating the Fed’s plan to continue raising short-term interest rates. It worked. In the days following the meeting, the stock market sank as long-term interest rates spiked. That second occurrence was the main goal of Powell’s verbosity, and he may try again before year’s end. Will it work again, or will the Fed ultimately be forced to accommodate the markets instead of the other way around? The answer lies in recent history.

As we have said before, a lot of what we’re seeing this year is very similar to what we saw in 2018, the last time the Fed was actively raising short-term rates. It’s always a tricky process, and this year is no exception. The Fed wants to raise short-term rates just enough, and at the right pace, to slow inflation by decreasing demand. But they know if they raise rates too high too quickly, they could start a recessionary spiral. In a way, the challenge is analogous to treating cancer with chemotherapy. Doctors want to administer just enough chemo to kill the cancer without killing the patient. The difference is that doctors have much better ways to monitor the process for accuracy than the Fed does. All the Fed’s data is backward-looking. The economic impact of the four rate hikes they’ve already approved this year won’t be known for months yet. So, when it comes to the question, “When should we raise rates again and by how much?” they’re guessing.

The Yield Curve Factor

Nevertheless, they still want to have the option to raise rates if they see fit, and they know they won’t really have it unless market conditions are just so. Specifically, they need long-term interest rates to be high enough to allow them to raise short-term rates again without fully inverting the yield curve. Right now, the two-year US treasury has a higher yield than both the 10-year and the 30-year bonds, which means parts of the yield curve are already inverted. If the Fed were to let their benchmark short-term rate rise higher than the interest rate on the 10-year government bond and other government bonds, they would fully invert it and greatly increase the potential of a recession. The Fed is desperate to avoid that. but they can only really control the direction of short-term rates. Long-term rates are controlled by market forces, and from late June through late August, those forces drove long-term rates downward.

That brings us back to Chairman Powell’s jawboning. Because inflation dropped slightly in July* and the stock market was recovering, investors were hoping the Fed would signal they might dial down their aggressive plan for raising short-term rates. Instead, Powell reinforced his commitment to the plan, which, of course, reignited fears of a major recession. That fear triggered selloffs across the markets. The S&P 500 fell by over 5% in the three days following the Fed’s meeting in Wyoming, and the interest rate on the 10-year government bond jumped from 2.8% to 3.1%.** With the Fed’s benchmark short-term rate now at a range of 2.25 to 2.50%, that spike in long-term rates gives them more room to approve another rate hike at their September meeting. They may or may not do it, but at least now they have the option, which is exactly what Chairman Powell wanted.

Portfolio Impacts

Again, before Powell’s remarks, both the stock and bond markets had been in recovery mode since mid-June. At that time Wall Street was at its lowest point of the year, and the interest rate on the 10-year government bond was at 3.48%, its highest level in 11 years.*** As you well know, long-term interest rates rose fairly steadily from January to June, driving down the value of the bonds and bond-like instruments in your portfolios due to the inverse relationship between bonds and interest rates. Those values recovered by about half when long-term rates fell again in July. That much recovery that quickly is unusual, so we were not surprised when rates changed direction and values fell slightly again by the end of August, although they remain higher than they were at the end of June. Of course, the most important point — as we always stress — is that with these instruments it doesn’t really matter if the values fluctuate because your income return is unaffected. As for our stock portfolios, they finished August roughly even with the market, meaning down about 3.5% for the month. Where we differ from the market is in our year-to-date performance. We’re still up slightly on the year whereas the S&P 500 is down around 15%. The even bigger difference is in our dividend yield, which, at 4.4%, is about triple that of the S&P.

The bottom line is that after a nice stretch of calm over the summer, the markets have gotten a bit crazy again, but it’s nothing we haven’t seen before. We saw this same game played throughout 2018: long-term rates would start to ease down and then, just weeks before the Fed’s next policy meeting, Chairman Powell would come out verbally over-compensating in the press, causing long-term rates to spike again. This strategy worked for most of the year, but the tables turned in December. By that time, other market forces were too strong for investors to ignore, and the bond market said, “enough is enough.” Although the stock market continued falling, it did so in conjunction with a flight to quality that pushed bond values up and long-term interest rates down. As a result, the Fed not only had to stop raising short-term rates, but it also had to start lowering them again. In other words, like a lot of the Fed’s tools, its overly verbose tactic has its limitations, and we believe we may see it reach those limitations again soon. They may be able to manipulate the markets into letting them approve a couple more rate hikes this year, but after that we think the bond market will say “enough is enough” again and stand its ground, forcing the Fed to hit the brakes.

In other words, we think the dog will start wagging the tail again, instead of the other way around.

*“Inflation Eased Slightly to 8.5% in July,” Wall Street Journal, Aug. 11, 2022

**“The Stock Market Has Tanked Since Jerome Powell’s Jackson Hole Speech; That’s How Jerome Powell Wants It,” Fortune, Aug. 30, 2022

***Y-Charts.com

Investment Advisory Services offered through STRIDE Financial, LLC, an SEC Registered Investment Advisory Firm

Market Commentary: Good News for Wall Street, Bad News for the Economy

by Sam McElroy, PsyD
CEO, STRIDE Financial

July brought a mix of good news and bad news for the economy and financial markets. On the good side, the stock market rebounded after hitting its lowest level of the year in June. On the bad side, the U.S. economy shrank again in the second quarter, signifying that we are officially in a recession. Maybe. Let’s start there.

Historically, two consecutive quarters of economic shrinkage make a recession. The U.S. economy shrank by 1.6% in the first quarter. On July 28 the Commerce Department reported that it shrank again by 0.9% in the second quarter.* So, technically we are already in a recession. But this time around, some officials are saying, “Not so fast.” They’re arguing that the textbook definition is too broad and doesn’t really hold up in our current situation. For one thing, they point out that the economy’s contraction in the first quarter had more to do with the trade deficit than with a slowdown in spending and manufacturing. For another, they note that several areas of the economy are still quite strong, especially employment. With that in mind, they argue we should let the National Bureau of Economic Research determine whether we’re in a recession based on its definition, which is “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”

One of the officials making this argument is Federal Reserve Chairman Jerome Powell. He probably already knew about the second quarter shrinkage when he insisted the day before that we’re not in a recession, and that the very idea made no sense. His comments came shortly after the Fed raised short-term interest rates by three-quarters of a percent for the second time in two months to try to curb inflation, which stands at a 40-year high of 9.1%.** It’s no surprise Chairman Powell would reject the recession argument since saying we are in a recession might make it a self-fulfilling prophecy. That’s due to the “reverse wealth effect,” which we have discussed many times. When people “feel wealthy” due to a rising stock market and strong economy, they’re more apt to spend, making the economy even stronger. That’s the wealth effect. But when they “feel poor” because the markets are down or because the government says we’re in a recession, they’re less apt to spend, which makes matters worse. Chairman Powell doesn’t want that because if spending decreases too much we could end up in a true recessionary spiral, which would force the Fed to stop raising short-term rates and possibly start lowering them again. That may eventually happen anyway, but the Fed wants to fight it for now.

Wall Street’s Take

Also, for now, Wall Street is siding with the Fed, which is why the stock market basically shrugged off the report about the second quarter contraction and continued to rally as July ended. After the Fed approved its three-quarter percent rate hike, the S&P 500 jumped 2.6%. It then added another 1.2% the next day, after the release of the Commerce Department’s report.*** The rally suggests that investors had anticipated the Fed’s three-quarter percent increase and the prospect of second-quarter shrinkage, and priced them in ahead of time. It also capped off a strong six-week run for the stock market, which has been on the upswing ever since mid-June, when all three major indexes were in or near Bear Market territory. Will this optimism last?

For a while, maybe, but even many economists who agree we’re not in a recession yet still believe one is probable by next year. The bond market appears to be siding with them. Since mid-June, the yield on the 10-Year Treasury rate has fallen by over 0.70%.*** That suggests the bond market is already “pushing back” against the Fed’s efforts to continue raising short-term rates for fear that it could make the coming recession worse. Remember, long-term interest rates need to rise ahead of short-term rates to avoid a completely flat or inverted yield curve. With the Fed’s benchmark short-term rate now at a range of 2.25% and 2.50% (its highest level since before the Financial Crisis) and the 10-Year at 2.62%, the curve is already nearly flat. And by another measure, the yield curve is already inverted because the interest rate yield on a two-year government bond is now higher, at 3.10%, than it is on the 10-year bond.

If all of this sounds familiar it’s because we saw this same dynamic play out in 2018, the last time the Fed was actively raising short-term rates. Back then, inflation wasn’t such a concern, and we weren’t in a recession by any measure. Still, by the end of the year, the bond market (which is often said to be “smarter” than the stock market) saw a potential recession coming and started pushing back hard. By December the Fed was forced to halt its rate hikes and then start raising rates again as the economy worsened in 2019.

What’s Next?

So, with the bond market already pushing back, what will the Fed do at its next meeting in September? That probably depends on inflation more than anything else. If we see inflation come down in August to 5% or 6%, we think the Fed may sit on its hands. Either way, we also think that if the bond market is right and the “real” recession has yet to start, it means the stock market could sink back into a Bear Market that exceeds the lows we saw in June. That’s the bad news. But the good news for bond investors is that the headwinds caused by rising interest rates may now have peaked. We are not ready to carve that in stone yet, but signs are currently pointing in that direction.

Naturally, you’ll see all of July’s good news reflected in your latest statements. Most of our portfolios had a positive month. Our dividend strategies are back in the black and beating the markets again, and values on our bonds and bond-like instrument have recovered about a third of their year-to-date losses, on average. That’s great, of course, but ultimately, it’s unimportant because just as your income return remains the same when your values are falling, it does so too when your values are rising — which is the main reason you’re investing for income in the first place! As always, call our office if you have any questions or concerns, and enjoy your summer!

*“US Economy Shrinks Again,” The Street, July 26, 2022
**“Fed Raises Interest Rates by 0.75%,” Yahoo News, July 27, 2022
***“Market’s Recent Rally Could Be Unwelcome for the Fed,” Yahoo News, July 29, 2022

Investment Advisory Services offered through STRIDE Financial, LLC, an SEC Registered Investment Advisory Firm