By: Barb Rishel
Although Qualcomm (ticker: QCOM) is not a household name, its products are an essential part of everyday life. QCOM is transforming the way we work, live and communicate so we can stay intelligently connected using state-of-the-art proprietary semiconductor chips and software. QCOM is the world’s leading supplier of chipsets for mobile phones, tablets and modems, and it receives a steady stream of royalty revenue from their extensive wireless patents.
By: Alex Olshanskiy
In a world where inflation is uncertain and a recession seems very possible, productivity is essential for growth and stability. The U.S. Bureau of Labor Statistics states “with growth in productivity, an economy is able to produce—and consume—increasingly more goods and services for the same amount of work.” One potential catalyst to limit the possibility of “low economic growth” and perhaps a recession comes from advancements in the technology sector—more specifically—Artificial Intelligence or AI.
By: Chad Meyer, CFA
For all of its joys, the holiday season also has a well-documented history as a source of stress. And while they couldn’t all have been hosting their in-laws for an extended visit, American investors certainly bore the brunt of that phenomenon this past December. As trees were lit and skis were waxed, market commentary ranged from stunned disbelief to gallows humor. Perhaps nowhere was the mood more accurately captured than in the Wall Street Journal’s Christmas Eve headline: “On the Bright Side, The Market Closes Early Today.” Bah humbug, indeed.
By: Eric Schopf
The year 2022 was defined by broad inflationary pressures and the Federal Reserve’s efforts to reestablish price stability. Two additional interest rate hikes during the fourth quarter demonstrated the Fed’s resolve. The federal funds rate stood at just 0.25% as recently as March, but following seven rate increases, the rate closed the year at 4.5%. The goal of all central bankers during an inflationary cycle is to engineer a soft landing by reducing inflationary pressures through higher interest rates. The trick is to raise interest rates high enough to contract demand without tipping the economy into recession.
By: Alex Olshanskiy
Currency can impact expenses and revenues. Many quarterly updates by companies in 2022 consisted of negative results due to a strong dollar. This was especially the case with technology companies that are included in the S&P 500 Information Technology Index, which generate a majority of its revenue (57.8%) outside of the United States. If you were lucky enough to travel overseas in 2022, you may have experienced the benefits of a stronger dollar since purchasing power for U.S. citizens increased on international products and services.
By: Rick Rubin, CFA
The SECURE Act 2.0 (Setting Every Community Up for Retirement Enhancement) builds on the SECURE Act of 2019 and was signed into law on December 29, 2022. The legislation provides many changes that could help strengthen and improve the retirement system in America.
By: Chad Meyer, CFA
As the temperature finally drops, the landscape subtly shifts, and children everywhere resignedly dig out their real shoes and dust off their textbooks, it’s difficult not to take pleasure in the perennial change that autumn brings. After all, and as anyone who’s watched more seasons pass than they care to admit knows, this brand of change—the predictable kind—doesn’t really count as change at all. Instead, it represents a keeping of plans and all the comforts that come with knowing the world is still spinning right on schedule.
By: Eric Schopf
The third quarter was an extension of the second. Red-hot inflation, tight labor markets, war in Ukraine and sporadic Covid-related shutdowns in China all weighed on the financial markets. The Federal Reserve responded to inflationary market conditions with two more 75 basis point interest rate increases, and the result was additional drawdowns in the stock and bond markets. The Standard & Poor’s 500 index delivered at total return of -5.9% while the Bloomberg US Intermediate Government/Credit index declined 3.1% during the quarter. For the year, the S&P 500 has declined 23.9% and the intermediate-term Bloomberg fixed income index is down 9.6%. Longer term fixed income returns have fared even worse, with the Standard & Poor’s Treasury Bond Current 10-year index down 16.7% year-to-date.
By: Alex Olshanskiy
The COVID-19 pandemic that started in 2020 sparked an unprecedented flow of money from the government. This broadly based stimulus flowed into every area of the market, sending the market on a wild ride—spurring inflation—and eventually giving rise to a bear market. Investors will find that our value investing strategy will help with soaring inflation and market performance.
With class officially back in session, it is perhaps fitting to greet fall with the words of an author familiar to most every American student. “October,” wrote Mark Twain, “is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.”
By Eric Schopf
The Standard & Poor’s 500 carried strong momentum from the first half of the year into the third quarter. After setting fifteen new closing highs during the first quarter and nineteen during the second, twenty new all-time highs were recorded in the third quarter. A pullback of over 5% during the final weeks of September, however, all but erased these gains. For the quarter, the S&P 500 registered a total return of just 0.58%, but this year-to-date total return is still an impressive 15.92%. Interest rates moved higher during the quarter, with yields on the ten-year United States Treasury bond rising from 1.45% to 1.53%.
By Ted Hart
Cisco Systems (Ticker: CSCO) was once a tech darling. During the Tech Bubble of the late 1990s, Cisco quickly climbed to become the most valuable company in the world. As the market leader in internet routers and network switches, investors believed that the company “that powered the internet” had growth as far as the eye could see. Shortly after the millennium, and as the economy went into a recession, the growth of the internet faltered and left Cisco’s growth prospects dim. Since then, the company has increased sales at about 5% per year. However, during the same period, the stock has languished due to its lackluster growth relative to its technology peers. All the while, Cisco kept one of the cleanest balance sheets in the industry and rewarded shareholders with above-average dividend growth. And next, hybrid work (a mix of working from home and in the office) landed right in their laps! Cisco may not regain the crown as the world’s most valuable company, but their prospects are stronger than they have been in over twenty years.
By Barb Rishel
Why are there so many trucks on the road and why are the store shelves so empty? Why is it taking so long to get my stuff? And why does everything seem more expensive?
These are questions we find ourselves asking almost every day. The U.S. economy is strong, with gross domestic product (GDP) up 12.2% in 2Q21. People are going back into the office (more traffic!), and the holidays are fast approaching. So why are there so many shortages?
With the fireworks long faded and the bunting stowed away, the high holiday of summer has come and gone. But if the party is over, a question now looms large. Who’s going to tell that to the American stock market?
For starters, let me once again begin with what matters most – your family’s health. In these humbling and unprecedented times, one cannot help but be reminded of life’s true priorities. As vaccines are widely available and a true “reopening” seems to be here, it is my sincere hope that this letter finds you and your loved ones in good stead.
By Eric Schopf
Investors were rewarded once again in the second quarter. The Standard & Poor’s 500 provided a total return of 8.55%, bringing the year-to-date return to 15.25%. The S&P 500 is now 90% higher than the pandemic low point of March 20, 2020 and 30% higher than the February 14, 2020 pre-pandemic high. The reward for risk has been substantial. Fixed income investors were not left out as yields on ten-year United States Treasury bonds fell to 1.45% from 1.74% during the quarter.
