AJA Weekly Recap

2022 | September 26

John,

Here is your weekly market commentary. We hope you enjoy receiving our newsletters. If you have any questions about the following content, please let us know!

- The AJA Team

This Week….

  • Upcoming Events
  • The Markets
  • CPI & Federal Funds Rate
  • New Words

Direxion By The Numbers


Spending Money You Don't Have

As of 6/30/2003, credit card debt in the US was almost 3 times the size of student loan debt, i.e., $690 billion to $240 billion. By 6/30/2010, credit card debt ($740 billion) was smaller than student loan debt ($760 billion). As of 6/30/2022, credit card debt ($890 billion) has been overwhelmed by student loan debt ($1.59 trillion) (source: Federal Reserve Bank of New York).

Upcoming Firm Events

AJ Advisors Open House

September 29 | 5PM


We are bringing it back! After several years off due to COVID, we plan to host our annual Open House at the office this year! Join us for good food, music and fellowship. Click here to register.

Medicare Seminar with Margaret Smith
October 27th 4:00-5:30 pm | In Person and Via Zoom

Have questions about signing up or reviewing your Medicare coverage during open enrollment? Margaret Smith with Medical Accounts Management will be joining us again for a discussion on what you need to know!

The Market

Stocks Down Again


With many of the world’s major central banks rapidly raising interest rates, the major U.S. stock indexes fell for the fifth time in six weeks to levels near year-to-date lows. The latest losses of around 4% to 5% were similar in scale to the previous week’s steep declines. The S&P 500 closed on Friday at 3,693.2 for a loss of 4.6% on the week.


Since mid-August, the NASDAQ has tumbled more than 17%, the S&P 500 has dropped about 14%, and the Dow has fallen more than 13%. The indexes are all close to their levels of mid-June, prior to the rally that had sent stocks higher through much of the early summer.


For its third meeting in a row, the U.S. Federal Reserve sought to keep inflation in check by approving a 0.75 percentage point increase in its benchmark interest rate. The move pushed the rate to a range of 3.00% to 3.25%—a level last seen in 2008. Fed officials projected they would lift the rate by at least another 1.25% over the last two meetings of this year.


The yield of the 10-year U.S. Treasury bond climbed for the eighth week in a row, reaching around 3.69% on Friday. The yield is up from 3.45% at the end of the previous week and from 2.64% at the end of July. The inversion of the yield curve became more pronounced, as the 2-year Treasury yield rose to about 4.20%—the highest since 2007.


With recessionary fears growing, the price of U.S. crude oil dropped around 7% for the week, slipping below the $80-per-barrel mark for the first time since early January. As recently as early June, oil briefly traded above $120.


An index that measures investors’ expectations of short-term U.S. equity market volatility jumped about 14% for the week, climbing to the highest level since June. The CBOE Volatility Index (VIX) was up more than 50% from a recent low in mid-August.


The United Kingdom’s central bank, the Bank of England, raised its benchmark lending rate from 1.75% to 2.25%—a level last seen in 2008. It marked the seventh meeting in a row at which the bank has lifted rates.


A report scheduled to be released on Friday will be closely watched for any further signs that U.S. inflation may have peaked. The government will update its Personal Consumption Expenditures Price Index, the Fed’s preferred gauge for tracking inflation. The most recent monthly report showed that PCE inflation moderated at an annual rate of 6.3%, down from 6.8% in the previous month.  


Source: John Hancock Investment Management

CPI & Federal Funds Rate

The two charts below show the correlation between inflation and the Federal Funds interest rate.


CPI is a commonly cited measure of inflation. It uses a basket of goods and services to track price changes for consumers. In order to measure the underlying trend in inflation, rather than temporary shocks to food and energy, economists often focus on Core CPI. Inflation remains at four-decade highs but there are early signs that price pressures may be cooling.


The Fed is rapidly raising interest rates as it responds to high inflation, especially on food and energy which affects consumers. The market expects the Fed to continue down this path of rate hikes through early 2023. This change in Fed policy could push all interest rates higher in the coming years.

Yeet! They Added Pumpkin Spice.

You may be more familiar with some of the new words Merriam Webster added to its dictionary than others. Earlier this month, 370 words were added to the lexicon, including:


  • Pumpkin spice. Autumn is pumpkin spice season. The flavor, which is now two decades old, is available in lattes, candles, pancake mix, lip balm, beer and deodorant, among other items. It also can be found in the dictionary where it is defined as “a mixture of usually cinnamon, nutmeg, ginger, cloves, and often allspice that is commonly used in pumpkin pie.”


  • Yeet. Even though ‘yeet’ was the American Dialect Society’s slang word of the year in 2018, Merriam Webster did not add it to the dictionary until this year. They explained, “When a new word starts making the rounds, we don’t just yeet it into the dictionary the first time we encounter it.” Yeet is slang, “used to express surprise, approval, or excited enthusiasm” or “to throw especially with force and without regard for the thing being thrown.”


  • Magnet fishing. Rather than tie a hook on a line and cast for fish, magnet fishers are hoping to attract sunken treasures. The activity is a meld of environmentalism and treasure hunting that is defined as, “the sport or hobby of using a strong magnet attached to the end of a rope to find metal objects in bodies of water.”


Some of the new entries are abbreviated versions of words that have been part of our vocabulary for a long time. This may be the inevitable outcome of adapting to text and social media communications. See if you can guess the longer version of these new words:


  • FWIW
  • ICYMI
  • Sus
  • Laggy


If you get stumped, visit merriam-webster.com or give us a call!

AJ Advisors
www.ajadvice.com
Phone: (615) 709-8709
Fax: (615) 505-3306
Advyzon (coming soon)
John Stauffer, CFP®
Partner

Andrew Quinn, CFP®
Partner

Emily Triano
Operations Associate

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this newsletter (article) (including the investments and/or investment strategies recommended or undertaken by AJ Advisors), will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from AJ Advisors. Please remember to contact AJ Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you want to impose, add, to modify any reasonable restrictions to our investment advisory services, or if you wish to direct that AJ Advisors to effect any specific transactions for your account. A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.