The DOW finished this week at the highest level since April. YTD it’s now only down 6.1%. The S&P 500 is down 16% and the Nasdaq is down 29%.
We’ve seen a nice bounce off the October lows. The lower inflation number provided some fuel to the rally this month. With the mid-term elections now also in the rearview mirror and the upcoming annual Santa Clause rally upcoming, I expect a rally into year-end.
I had reiterated this in my last Investing Update: I Went On a Buying Spree. I mentioned that I wouldn’t be surprised to see the DOW go green to end the year. At this point, with as wild of a year that it has been, I’m now expecting the DOW to finish positive for the year.
I’m currently fully invested and haven’t made any recent moves. My big buying blitz occurred a few weeks ago as I discussed in my previous Investing Update. Right now I’m doing a lot of watching. There are still some upcoming earnings calls that I have some interest in hearing.
I’m also watching to see how the holiday shopping season is looking after Black Friday. The consumer discretionary sector has had a rough year and there are some names in there that may offer a good long-term opportunity. Especially among the retailers.
Asset Class Returns Since 2011
Here is one of my favorite charts to periodically revisit. This shows that to achieve very high outsized returns, you also have to take on some very high volatility. High risk, high reward. It also illustrates that diversification and investing over the long-term wins out.
Hedge Fund Buys & Holdings
As I reviewed the 13Fs from Q3 and the below from App Economy Insights, it’s clear that hedge funds have not been doing a lot of buying. The top 5 buys chart from Q3 has more blanks in it than I can remember seeing after a quarter. I’m betting that when the Q4 chart comes out it tells a different story as October set new market lows.
Not a lot has changed in the top 5 positioning from Q2. The most popular names are still the most popular. Amazon AMZN 0.00%↑ is the most held and seems to have moved into a lot of top 3 positions among their holdings. Microsoft MSFT 0.00%↑ and Alphabet GOOG 0.00%↑ come in as second most held.
2023 Retirement Plan Limits
The White Coat Investor made an awesome chart showing what all the retirement plan contribution limits are increasing to in 2023. I had made a chart showing what the 2023 limits were going to but then I came across this chart, I scrapped mine. He has the 2022 limit, then the 2023 limit and the amount it changed. A prefect tool for your 2023 planning.
Two Concerning Charts
There are two charts that do cause a bit of concern for me. The first is one measure into the financial health of US consumers, the personal savings rate versus consumer loans. As you can see they’re going in completely opposite directions. Consumer savings is dwindling. Not a great sign as inflation continues to take a toll.
The other is what’s happening to housing. As interest rates climbed the housing market has come to a halt. As it looks to head even lower, the odds lower home prices follow is quite high.
I bring both of these up as consumer spending is what drives GDP. It makes up roughly 70% of it. If spending tightens further that will hurt companies and the overall economy. House values, savings and retirement account balances have a sentiment effect on consumers feelings about spending or about putting money into their homes.
For many Americans, their home is their largest investment. If the Fed continues to tighten and raise rates, housing continues to get hurt. Eventually prices will fall. This is why so many are watching what the Fed does and says. They’re still the key to both the stock market and the economy.
The Coffee Table ☕
Ben Carlson wrote a reminder on how investing should be boring and like watching paint dry. Check it out here Boring is Beautiful in Investing.
I enjoyed reading Blair Duquesnay’s post entitled Savers Get Paid Again. She details how the increased interest rates may push more into less risky investments and more in favor of the traditional diversified 60/40 portfolio mix.
My two favorite bourbons (Blanton’s & E.H. Taylor) are rather hard to get. My third favorite is much more accessible. Jefferson’s Ocean Aged at Sea can be found at most liquor stores and sometimes even at Costco. Give it a try and I hope you enjoy.
Thank you for reading! If you enjoyed Spilled Coffee, please subscribe and/or give a gift subscription for others.
Spilled Coffee grows through word of mouth. Please consider sharing this post with someone who might appreciate it.
Disclaimer: This is not investment advice. You should not treat any opinion expressed as a specific inducement to make a particular purchase, investment or follow a particular strategy, but only as an expression of an opinion. Do your own research.