Market Minute Week of 1-15-2024

Welcome to the “Market Minute” series! In this weekly blog post, Dave will provide you with all the latest updates on market and economic trends that you need to stay on top of. As an experienced financial expert, Dave will share his insights on the most significant news and developments from the week gone by. Whether you are an investor, economist, or simply interested in the world of finance, this series is designed to provide you with useful information that can help you make informed decisions. We understand the importance of keeping up with the fast-changing world of finance, and that’s why we’re committed to bringing you the latest market news, analysis, and commentary in this series. So sit back, relax, and get ready to learn about the latest trends in the financial world through our “Market Minute” series.

Market Minute For the Week of January 15, 2024

Last week was strong for US stocks with the S&P500 rising 1.8%. The US Aggregate bond index rose for the week as well, up 0.92%. The Headline Consumer Price Index showed a 0.3% rise in inflation during December, bringing the year-over-year estimate to 3.4%. Initial jobless claims fell to 202k.

Being Smart About CDs

In their weekly recap, JP Morgan reminds us that cash investments usually underperform in the period following rate increases. They point out that investors moved a lot of money into CDs and money markets as rates became more attractive last year, but now face reinvestment risk.

The right amount of cash to hold doesn’t have anything to do with rates. We would expect cash and certificates of deposit to underperform stocks and bonds over time with only brief periods of outperformance. The right amount of cash investments in a portfolio should be determined by how much you need in reserves/contingency funds along with money you expect to need to spend in the next 24 – 36 months. Not current CD and money market rates.

The myth of the 1 million dollar cup of coffee

Morningstar’s John Rekenthaler takes the financial planning homily about skipping your morning coffee to task. The story, a favorite of the likes of Suze Orman, goes that if you skip your expensive coffee every morning and invest the money instead, you’ll accumulate $1 million throughout your adult lifetime. Mr. Rekenthaler does the math and points out that it only works if you’re buying super-expensive coffee, and that when you factor in moderate (he uses 3%) inflation, it all falls apart. 

He agrees with the spirit of the story, as do I: “For most Americans, underinvesting is a choice,” and we need to examine our spending and think about how we are using our money. But he also reminds us that maybe our coffee has value to us, such as social interaction, that goes beyond the coffee itself (that Ms. Orman says we just “pee down the drain”).

He also highlights two other important notes: For Americans who can afford a $6 cup of coffee, there may be more meaningful ways to avoid underinvesting, such as buying less expensive and more efficient vehicles.

Upcoming Week

Retail sales, consumer sentiment, and existing home sales.

Have a great week!

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