Mark on the Markets
May 2023

Plan for Uncommon Retirement 

The word “retire” is common in the lexicon of our culture. We plan for retirement because we know that we may not be able to work forever, at least not in the traditional sense of a regular job or business. An artificial retirement age set by our employer may limit our options. Some people may be forced to retire due to job loss or company downsizing. Health issues may also dictate how long we can work. However, most of us plan for a time when we will not, or cannot, continue to work in our lifelong profession.

I, personally, prefer using the word “repurposing” your life, not retiring. If we are honest with ourselves, we really never stop working, but transition from our primary income job or business into a life of service to others in a different capacity. This repurpose may not be the same for everyone.

Retirement is not a biblical concept. Life is about vocation, not vacation. Even the Levites transitioned as they got older in their priestly duties and were commanded to “… retire from the workforce and serve no more.” and to “… assist their fellow Levites in the tent of meeting…” Num 8:25 -26. In other words, stop doing the heavy lifting and focus on serving your brother in a different capacity. Transitioning out of our primary job in retirement is a time to restore balance, rest, and service to our calling.

After we work for a lifetime, the first inclination is to take some time off, a sabbath. Sabbath is a reminder that everything we have, food, clothing, housing, and family, is a gift from God. It’s a time to remember to first trust in God for providing for all our needs. And in proper context, this is a concept woven into the history of man. Just as God rested on the seventh day, so He commanded the Israelites in the Sinai desert: “For in six days the LORD made the heavens and the earth, the sea and all that is in them; but on the seventh day he rested. That is why the LORD has blessed the sabbath day and made it holy. Ex 20:10. The Sabbath was, and still is, a day of rest.

So, how will you repurpose your life when you retire? What is your calling?  What are your goals?  Your calling and goals are certainly not mine. They’re not your family members’, and they’re not your friends’ goals. Discerning your next step after retiring plays a big role in how you plan for the next stage in your life.

I believe the question is answered in prayer and meditating on His Word: “Lord, what would you have me to do?

Our role, as your trusted advisor, is to help you plan for the next chapter in your life. There are no easy roads, but a disciplined approach that emphasizes consistent savings, a prudent investment strategy, a modest lifestyle based on your income, and service to others will serve you well as you travel the road toward financial contentment. Let us work with you to bring wisdom and experience to the investment management and planning process as you repurpose your life.

Bank Failures, Interest Rate Talk, & Economic Anxieties

Is the banking crisis finally in the rearview mirror? During March, Silicon Valley Bank (SVB) unexpectedly collapsed after it announced a plan to raise capital. Signature Bank (SB) was shuttered shortly after SVB’s closure.

At the time, it was the second and third-largest bank failures in U.S. history.

First Republic Bank (FRB) was already on shaky ground but had survived by borrowing heavily from the Federal Reserve and government-backed lending groups.

When it released its earnings in late April, FRB said it lost a significant amount of deposits in the first quarter, dooming its ability to remain independent.

Shortly thereafter, with the assistance of the FDIC, JPMorgan Chase (JPM) announced on May 1 that it will purchase the deposits and most assets of First Republic. FRB’s failure is now the second-largest failure in U.S. banking history.

How does this compare to the 2008 financial crisis? It doesn’t.

The 2008 crisis was sparked by ultra-easy mortgage lending practices that encouraged borrowers to buy homes they couldn’t afford and take out mortgages they didn’t understand.

While Signature Bank was heavy in the crypto space, the common thread in the 2023 bank failures was a bad bet on interest rates, not poor-quality assets.

FRB leaned heavily into jumbo-sized mortgages when rates were much lower. Silicon Valley loaded up on long-term Treasury bonds when yields were at rock-bottom levels.

When interest rates rose, those assets fell sharply in value, leading to their demise.

The decision by the FDIC to fully back the deposits of SVB and SB probably prevented a series of bank runs on mid-sized regional banks, which would have greatly increased the size and scope of the crisis.

Moreover, the Federal Reserve implemented a new lending facility to allow banks to borrow using high-quality assets as collateral, which helped shore up liquidity and calm frazzled nerves.

It’s not that these banks were experiencing the kind of troubles we saw in 2008, but the fear of a panic was real for those who had deposits that exceeded the FDIC limit.

It only takes a few keystrokes on a PC or smartphone to move cash today. Welcome to the world of 21st-century bank runs. We can’t definitively say there aren’t problems still lurking in the shadows. But JPMorgan CEO Jamie Dimon, “This part of the crisis is over. For now, let’s take a deep breath.”

But the Fed will keep its options open. Talk of a pause helped markets rise in April. Better-than-expected corporate profits, according to Refinitiv, also supported stocks, offsetting economic concerns.

Still, economic storm clouds on the horizon likely limited gains last month.

Economist Mark Zandi of Moody’s Analytics said late last year “Usually, recessions sneak up on us. CEOs never talk about recessions. “Now it seems CEOs are falling over themselves to say we’re falling into a recession. …Every person on TV says recession. Every economist says recession. I’ve never seen anything like it.”

Even the Federal Reserve, which rarely talks about recession in advance, expects a mild recession to develop later in the year.

Given the recent market action last month, investors aren’t yet betting on a recession.

Debt Ceiling Drama

The U.S. Treasury is running up against its ability to borrow to finance government spending, possibly as soon as early June.

Without an increase, the U.S. risks default. Republicans and Democrats are far apart, but a default is almost unthinkable. We believe a compromise will be reached that raises the debt ceiling since the failure to do so would lead to catastrophic consequences for financial markets and the economy.

Mark on the Charts

May 2023

The trading range continues. As I outlined in the April 2023 newsletter the trading range of the S&P 500 remains between a high of around 4,200 and a low of around 3,800. April ended with the S&P 500 at the top of the range (also known as “resistance”), at 4,169.

With the Federal Reserve meeting this week, we may see some changes. However, given the above “Anxieties” outlined in this newsletter, there is a good chance that the trading range will continue for a while longer. I don’t predict the market, but just like the weather, we usually stay inside when the clouds are gray.

Investments must always be made in accordance with the evidence, and the greatest evidence we can see is with price. As a Chartered Market Technician, I look at indicators that measure the internals of the market, but the most important indicator is price and the movement of price.

The next substantial move in the market may give clarity to the intermediate trend of the market.  If we stay range-bound, the market may still trend sideways. As Warren Buffet once said, “The stock market is a device for transferring money from the impatient to the patient”. For now, we should remain patient.

I trust you’ve found this review to be educational and helpful. 

If you have any questions or would like to discuss any matters, please feel free to give us a call.  

Do not fear: I am with you; do not be anxious: I am your God. I will strengthen you, I will help you, I will uphold you with my victorious right hand. Isaiah 41:10

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