Newsletter

The U.S. national debt now stands at $33 trillion, or 120% of gross domestic product (GDP). The federal budget deficit for the fiscal year that just ended is projected to be $1.7 trillion, or about $13,500 for every U.S. household. The rate of population growth plus inflation in the U.S. increased by 21.6% over the ten years ended 2022. Total annual federal spending increased 69.4% over that same period … or more than three times faster.

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Global stocks closed down just over 4% in September, while global bonds were off nearly 3% for the month. After delivering strong returns through July, stocks have been on the decline for the past two months. Still, global stocks remain up nearly 10% year-to-date and 14% over the past 12 months. These strong returns, initially driven by the excitement over artificial intelligence, have more recently been fueled by the hopes that inflation would subside without recession … an outcome otherwise known as a soft landing.

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Global stocks finished down by almost 3% in August, with declines broadly allocated across market sectors. While the Dow Industrials, S&P 500, and Nasdaq Composite all finished with losses at or around 2%, all three U.S. indexes showed noteworthy improvements from their midmonth lows. Still, global stocks remain up by nearly 15% year-to-date.

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Global stock markets gained over 3% in July and have now registered gains of just over 18% year-to-date. Large U.S. stocks, as measured by the S&P 500 Index, are up 20% so far this year … the best performance through the first seven months of a year since 1997.

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China’s economy seems to be following the “East Asian Development Model”, the same approach used by South Korea and Taiwan. The model emphasizes exports, investments in infrastructure, and heavy industry. In addition, economic and political control is centralized.

Such economies follow a cycle of strong initial growth, but growth eventually levels off amid political and financial distress. At some point, economies are forced to move to more market-oriented economic and political management.

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Global stock markets returned 5.8% during June, with domestic and foreign equities advancing 6.8% and 4.5%, respectively. The second quarter ended with returns of just over 6% for global equities and was led by double-digit returns for technology stocks. Global equities are now sporting returns of nearly 14% for the first half of 2023.

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Global stocks declined by just over 1% in May. Foreign stocks saw declines of over 3% for the month, while domestic equities were essentially flat. Bond investors also saw declines of about one percent during May. The yield on the benchmark U.S. 10-year Treasury note is now at 3.64%, up about 0.2% for the month.

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Global stocks advanced 1.4% during April and are now up about 9% for the first four months of 2023. Global equities have actually rebounded more than 19% since the market lows reached last September. While many investors remain fixated on the steep market losses incurred during calendar 2022, they may not realize that global stock markets have been rising at a compounded annual rate of just over 12% for the past 36 months.

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The demand for personal computers has softened, and chip makers are cutting production. The smartphone marketplace has basically peaked, as have the markets for wireless services and video streaming. 

The largest technology stocks – Apple, Microsoft, Alphabet, and Amazon – grew a collective 1% in the fourth quarter of 2022. Revenues are stalling or on the decline, as the headlines speak of layoffs and efficiency instead of innovation and opportunity.

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Global stocks and bonds each advanced about 3% in March, as investors survived a hectic month with solid returns. Despite bank failures and ongoing inflation concerns, domestic and foreign stocks had similar returns of about 7% for the quarter. The technology-based Nasdaq Composite index had a quarterly gain of 17%, a nice bounce after the 32% decline during calendar 2022.

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