What I Care About This Week | 2023 Nov 20

two black turkeys
Photo by Kranthi Remala on Pexels.com

by Franklin J. Parker, CFA

The Summary

  • Inflation posted lower than expected last week, and markets now believe the Fed is done raising rates. In fact, markets expect the Fed to begin lowering rates sometime around May of next year. We also saw data last week on retail sales and industrial production, both of which were pretty mediocre. Despite being a short week, we see important data on home sales, durable goods orders, and consumer sentiment.

  • Investors have taken the Fed’s commentary suggesting an end to rate hikes and slower inflation figures as an “all clear” signal. I am, however, still cautious. The economic data is still mixed — there hasn’t been a firm signal to suggest taking a strong stance in either direction. Besides, the market’s expectation that the Fed begin cutting rates in May of 2024 is itself a recessionary signal. The Fed tends to cut rates just before a recession. In the end, we need to see a firm change in the economic data: expanding corporate profits and employment, or a strong signal that things are weakening. Until then, unfortunately, we are stuck in what one client called “the longest recession watch in history.”

The Details

With Thanksgiving approaching, family is on our minds. And with family gathering, it is a good time to review your estate plan.

Estate planning is not something that most people want to think about regularly: What happens after I die? can be a morbid question to dwell on. Estate planning, however is about more than just that, and with family gathering, this is a good time to discuss your plans and expectations with them.

First, an important part of estate planning is detailing what you want to happen while you are still alive. Putting some basics in place, like medical and financial powers of attorney, are important to do because they are useful in moments where you are unable to make decisions.

It is also worth noting that much estate planning today involves adjusting the ownership of your assets while you are still alive in order to take advantage of tax rules and liability issues that center around how you own an asset. This kind of planning also aids in a smooth transition of those assets after your death.

The technical components of an estate plan are obviously critical (and should be handled by a good estate planning attorney), but it is also important that you communicate your plans and expectations to your family. Not to mention the value of simply showing family members where the documents are and who to call if something happens!

These little details can also help put family members at ease. And, if you need to start a conversation about putting something together, please reach out. While Directional Advisors does not provide tax or legal advice, we can certainly discuss what to expect and help you connect with the right professional for you.

Chart of the Week

Industrial production is one of the data points that I watch on my recession dashboard. Production tends to decline ahead of recessions (though not always). As the chart shows, we have had an extended period of weakness in US production, and this week’s data is not expected to change that trend. While not itself definitive (take 2015 – 2016 for example — production contracted, but there was no recession), it is a sign of weakness.

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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