What I Care About This Week | 2023 Sep 5

time lapse photography of stars during night time
Photo by Marek Piwnicki on Pexels.com

by Franklin J. Parker, CFA

The Summary

  • Last week’s job and inflation data tempered investor expectation of the economy. The unemployment rate ticked up to 3.8% and there were about one million fewer job openings than last month. Personal consumption expenditures — the Fed’s preferred measure of inflation — posted lower, and about in-line with expectations. Employment is usually the last economic domino to fall, and if this one is falling a recession may not be far behind. Factory orders reported a decline this month. This week’s data includes another look at the services sector, which is expected to continue its barely-above-breakeven trend, but otherwise this is a light data week.

  • Euro-area GDP posts on Thursday, which will give us another read on the health of the global economy. China has been in a slowdown and is Europe teetering on the edge of recession, but GDP is expected to post at a slight expansion (0.3%). With global economies sputtering, as I have talked about for months now, investors may do well to consider getting defensive. If nothing else, hedging might make sense. As always, your goals and time horizon will govern the risks that are appropriate to take.

The Details

Last summer, I was having lunch on the shores of Lake Maggiore in Italy with a few other investment professionals, one of whom I had known for several years. A former CIO for a family office, he had left that gig to start some cryptocurrency projects, including a fund and a venture or two in the non-fungible token (NFT) space.

“Man, I’m excited to ask you something I’ve not been able to get an answer to,” I told him. “I’ve followed bitcoin since 2011, I read Satoshi Nakamoto’s original white paper, and I really think blockchain will be an important piece of the future, but I never did invest.”

“Why not?!” he asked with a smirk. He had made quite a bit of money, and he had only been in crypto for a few years.

[Keep reading at Enterprising Investor…]

Chart of the Week

When a country borrows in a currency they do not directly control, budget deficits and total borrowing becomes a very important consideration for investors. Now that rates have risen at an historically rapid pace, governments in the euro-area are feeling the squeeze. This week’s chart shows the large increase in the numbers of “risky” sovereign borrowers in the Eurozone. As the chart shows, current figures comparable to the debt crisis from a decade ago.

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from Directional Advisors to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professionals, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

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