DIASTOLE ECONOMIC AND MARKET COMMENT
December 30, 2024

Rest in peace, President Jimmy Carter. While in the U.S. Navy in 1952, Carter entered a melting nuclear reactor in Canada to help dismantle its core before it could fully rupture. If you’ve never heard of a nuclear accident in Canada, you can thank President Carter. Oh, and there was the Nobel Peace Prize, too.

It seems ages ago now, but on the 18th, the Federal Reserve Open Market Committee announced another 0.25% interest-rate cut. We were expecting it only because there wasn’t a leak of information from the FOMC indicating a different action, but since it came with remarks from Chairman Powell that rate-cuts would slow in 2025, market reaction was negative. Of course, what happens in 2025 depends quite heavily on the new presidential administration and its economic policies. Both tax cuts and tariffs would increase inflationary pressures, the first by raising deficits and government interest costs, and the second by raising prices directly. We will see.

In other government news, Congress reached an agreement to keep the government open, and then the deal collapsed, and then a new deal was reached, which keeps the government running until, wow, March. It’s so great that we get to do this quarterly now. Once a year just wasn’t enough. And ALSO, the governmental debt ceiling will be reached as early as January 14th, per Treasury Secretary Janet Yellen. That means that the government starts robbing Peter to pay Paul until either its cash on hand is spent and government payments stop, or the debt ceiling is raised. The new Congress will be sworn in later this week, and hopefully will be better at governing than the old Congress. The presidential inauguration is on January 20th.

And still speaking of government, over the past 40 years, the U.S. population grew by about 100 million people. The national debt rose from $1.6 trillion in 1984 to more than $35.5 trillion today. But the number of civilian government employees has remained relatively stable at more or less three million workers. I don’t know how they keep things running, and perhaps it is the reason why things don’t run well.

LeBron James turns 40 today. That makes him the first and only professional basketball player to play in his teens, 20s, 30s, and 40s. Happy Birthday, LeBron!

For the week ending on December 27th, the Standard & Poor’s 500 finished at 5,970, the Nasdaq Composite at 19,722, and the Dow Jones Industrial Average at 42,992. The yield on the ten-year Treasury finished at 4.559%. U.S. crude oil cost $71.18 per barrel, N.Y. gold cost $2,632.25 per ounce, and one Euro was worth $1.04. (The dollar is strong. Time to go to Europe!)

Elizabeth E. Cook
Partner, Diastole Wealth Management

News and information presented here was gathered from sources believed, but not guaranteed, to be reliable, including (but not limited to) Axios, Yahoo Finance, Bloomberg, CNN, CNBC, 1440 Digest, The New York Times, The Washington Post, The Wall Street Journal, USA Today, The Economist, Reuters, The Associated Press, and Visual Capitalist. If you have questions, please call us at 203.458.5220.

Long-time readers will recall that I consider the scent of Play-Doh to be the best smell in the world (distant second: gardenia). Apparently I am not the only one. It turns out that only fifteen scents are trademarked in the United States, and Play-Doh is one of them (trademark owned by Hasbro). Among the others is the minty scent of Salonpas pain-relief patches, and the almond and vanilla fragrance of Harvest Dental Products dental wax. And there are some weird ones, too, like the smell of Storm Products bowling balls (apparently also minty). In order to be trademarked, the scent must be added to the product, and not innate. I bet you want to smell that bowling ball now, don’t you?

Happy New Year!

DIASTOLE ECONOMIC AND MARKET COMMENT
January 6, 2025

Thursday has been declared a National Day of Mourning for former President Jimmy Carter. The stock exchanges will be closed. So we have a third week in a row of shortened trading hours. On Friday, we will receive the December jobs number with heightened interest. Has the Federal Reserve given us one rate cut too many? Will there be chagrin at the Fed's late-January meeting? Both low inflation and full employment are part of the mission of the Fed, which has a 2% target inflation rate in place. Will our soft landing continue?

Here’s some other news from a light-news week:

Egg prices are hitting record highs. In the Midwest, a dozen large eggs now cost more than $6.00. High demand (did everyone bake cookies?) plus avian flu are contributing to price hikes. Some stores have limited the number of eggs customers can buy. The price squeeze is expected to moderate now that the holidays are ending.

Remember the debt ceiling? It was reinstated last week after a period of abeyance. It makes no sense to HAVE a debt ceiling so that Congress can vote for new spending and then vote NOT to raise the ceiling, but that’s where we are. President-Elect Trump is “demanding that GOP lawmakers address the debt limit before he takes office,” according to CNN. Our current total debt is more than $36 trillion.

U.S. mortgage rates climbed again and now sit just a smidge under 7%. (Smidge is the technical term, also known as a skosh.) We are still stuck in a low-inventory, high-cost vortex, which is pressuring demand. Houses are not all selling over asking price as they did during the pandemic, because some buyers have stepped back. But not all of them. In my area of coastal Connecticut, starter homes are selling for almost as much as second, forever, homes because demand is so high.

And speaking of the pandemic, it’s been five years since a “pneumonia of unknown cause” was first reported in China. There were a total of 44 cases then of what would later become known as Covid-19. It’s still out there, so get your latest booster! And throw in the influenza shot while you’re at it, if you haven’t gotten it already. The flu is nasty this year.

Beginning on January 1st, new babies are part of Generation Beta. I don’t know when we started counting generations as 14 years long, but out with Generation Alpha, and in with the Betas. Babies born this year will be 76 at the turn of the next century (which is technically the year 2101). I can’t keep Millenials untangled from Gen-Z, but that’s so Boomer of me.

For the week ending on January 3rd, the Standard & Poor’s 500 finished at 5,942, the Dow Jones Industrials at 42,732, and the Nasdaq Composite Index at 19,621. The yield on the ten-year Treasury Note closed at 4.596%. U.S. crude oil cost $73.34 per barrel, N.Y. gold cost $2,646.40 per ounce, and one Euro was worth $1.04.

Elizabeth E. Cook
Partner, Diastole Wealth Management

News and information presented here was gathered from sources believed, but not guaranteed, to be reliable, including (but not limited to) Axios, The Economist, Barron’s, MarketWatch, Business Insider, Morning Brew, Yahoo Finance, The New York Times, The Wall Street Journal, USA Today, The Washington Post, CNN, CNBC, Reuters, and The Associated Press. If you have questions, please call us at 203.458.5220.

The Onodera Group, a Japanese sushi restaurant chain, just paid $1.3 million for one tuna at Tokyo’s Toyosu Market. The bluefin tuna weighed 608 pounds and was roughly the same size as a male grizzly bear. The fish will be served at 13 of the Onodera Group’s restaurants. Of course, in 2019, the same restaurant chain paid $3.9 million for an Oma tuna which weighed 613 pounds, or about the same as a grand piano. As big as a grand piano, perhaps, but definitely without its shelf life.

DIASTOLE ECONOMIC AND MARKET COMMENT
January 13, 2025

We are in the no-man’s land between 2024 and the incoming Trump Administration. If you know what to predict, expect, or analyze, please let me know. And meanwhile, take all of the words that I type with skepticism. I will try to comment on what has happened without making predictions, and tell jokes without offending anyone. High wire!

Stock markets have fallen in the first almost-two weeks of the year. Several factors are to blame. First, of course, is the amazing performance of stocks over the past two years. It is no wonder that some people are taking profits. But, the bond market is also to blame. Bond prices have been falling (inevitably pundits will call it a “rout”) driving bond yields higher. And higher bond yields provide more competition for investment dollars.

Also, we got a whopping good December jobs report on Friday, in which 256,000 new jobs were added to the economy versus about 160,000 which were expected. Immediately, investors began to worry that the Federal Reserve Open Market Committee would use the strong job numbers as a reason NOT to keep cutting rates. After all, the economy doesn’t seem to need the stimulus at this point, right?

But, waaaah, we WANT rate cuts. Life would be easier with rate cuts. We could buy houses, and buy cars, and pay off our student loans. The Fed didn’t say there would be NO rate cuts in 2025, but they did imply that there would be fewer than previously expected.

Lots depends on the fiscal policy of the new Trump Administration. Tariffs are inflationary because they cause prices to rise to cover the costs of the tariffs. Tax cuts are inflationary because they increase the size of our federal deficit and debt. And inflation, of course, is what the Fed raises rates to fight.

Despite the Fed cutting rates by a full percentage point since September, yields on 10-year Treasury Notes have risen from 3.62% to 4.71%. Those yields are determined by the bond auctions the Treasury holds. In other words, market forces.

Which is why we have to wait and see. Not fun, and not popular, but necessary. Stick to your asset allocation, settle back in your La-Z-Boy, and watch tennis on t.v. You can thank me later.

But there are other things going on. The December jobs report confirmed that 2.2 million new jobs were created in 2024. The unemployment rate fell to 4.1%.

Nvidia CEO Jensen Huang said useful computers were still far off. “If you kind of said 15 years for very useful quantum computers, that’d probably be on the early side…. But if you picked 20, I think a whole bunch of us would believe it,” he said. Needless to say, tech stocks fell on the comment.

Meta CEO Mark Zuckerberg announced last week that he was ending fact-checking on Facebook and Instagram, in an effort to restore free expression. The comments posted about him since, just daring him to reinstate the fact-checkers, have been hilarious. Perhaps you could doom scroll while you watch tennis?

Chinese property developers are now paying off loans with unsold apartments. And local Chinese governments are following suit. If a property developer owes you money, who wouldn’t like to receive an unsellable apartment in lieu of payment?

For the week ending on January 10th, the Standard & Poor’s 500 finished at 5,827, the Dow Jones Industrials at 41,938, and the Nasdaq Composite Index at 19,161. The yield on the ten-year Treasury Note closed at 4.776%. U.S. crude oil cost $74.49 per barrel, N.Y. gold cost $2,704.70 per ounce, and one Euro was worth $1.02. That’s way down! Go to France!

Elizabeth E. Cook
Partner, Diastole Wealth Management

News and information presented here was gathered from sources believed, but not guaranteed, to be reliable, including (but not limited to) Axios, Yahoo Finance, Business Insider, Bloomberg, Barron’s, MarketWatch, The Economist, The Wall Street Journal, The New York Times, The Washington Post, 1440 Digest, Morning Brew, CNBC, CNN, Reuters, and The Associated Press. If you have questions, please call us at 203.458.5220.

According to AccuWeather, Florida is due for some temperatures in the low-to-mid 40s this month, just like it experienced last January. And you know what happens when it gets cold in Florida? Yes! Iguanas go dormant and fall out of trees. But what you may not have known is that iguanas can grow to up to five feet long. So it’s not a gentle tap on the shoulder if it falls on you. Experts say that if you come upon a dormant iguana, you should just leave it alone. No problem, experts, no problem.

DIASTOLE ECONOMIC AND MARKET COMMENT
January 21, 2025

I try very hard not to comment on politics in this weekly column. No matter what I might say, I would offend half of Americans (assuming all Americans are reading this, which I do). But the results of policies are fair game.

A president’s first full day in office doesn’t give me too much to work with, economics-wise, but the fact that newly-installed President Trump did not issue tariffs (yet) is noteworthy. He has said that he will impose 25% tariffs on Canada and Mexico on February 1st. Definitely time to stock up on avocados now. And that’s the problem with tariffs: they raise the price for the end consumer, not the manufacturer who passes the cost along.

You know what else raises prices? Bird flu. And bad weather. Eggs in December cost an average of $4.15 per dozen - up 14% from November. And I have a carton in my fridge that I now consider too precious to eat. 17.2 million egg-laying hens died in November and December from avian flu, according to CNN. Food prices overall rose 1.8% from a year earlier. Which doesn’t sound that bad, except that it comes on top of several years of rising costs. It is unlikely that we will see actual deflation, except in isolated markets occasionally, so we have to hope that wages continue to outpace inflation.

And it would be nice if house prices began to fall, but instead, we are seeing mortgage rates rise - now over 7% again, and prices NOT fall. Historically, rising rates cause falling prices, but as we Boomers sit in our too-big refinanced houses, rates at 7% are not low enough to entice us to sell. What would we buy? How much would we have to pay monthly? It’s no wonder that home sales have been poor for the past two years.

In other inflation measures, the Consumer Price Index rose 2.9% for the 12 months ending in December. The Producer Price Index, which measures what manufacturers receive for selling goods and services, rose 3.3% over the same period. I know you have it tattooed on your forehead, but here’s a reminder that the Federal Reserve wants to see inflation at 2%, and we’re not quite there. When inflation is high, the Fed usually raises interest rates so as to put a damper on prices and productivity. Is inflation high now? Not at all, but people FEEL like it is, and it was, recently. Will the Fed consider raising rates again, to bring down that last measure of inflation that seems intractable? The last indication that we got from the Fed was a hint that they had done enough in 2024 and might do nothing for much of 2025. Stay tuned next week for the Fed’s meeting and rate announcement.

The Congressional Budget Office is forecasting that U.S. deaths will exceed births by 2033. That’s eight years, people. And what it means is that our population could begin to decline, leaving jobs vacant and stressing working people to support retired people. This is not the fault of those fortunate enough to retire, but of the government which didn’t invest our Social Security payments for when we needed them in the future. The traditional way to overcome a birth deficit is to allow for increased immigration. And, luckily for us, skilled workers want to come here. Let them!

Today is the day that Janet Yellen said would begin the special accounting maneuvers required to keep the government open after it hit the debt ceiling. Of course, Janet Yellen is not the Treasury Secretary anymore, but the problem still exists. Trump’s Treasury pick, Scott Bessent, will have this to deal with if and when he is confirmed.

If you are a TikTok fan, you surely mourned when the app started going dark on Sunday, and rejoiced when it expanded operations again on Monday, based on the new president’s vow to postpone the Congressionally-voted and Supreme-Court-ratified TikTok ban. It may take selling TikTok’s assets to a U.S. company in order to keep it running for long, but Elon Musk has indicated an interest. Not joking. I, of course, know nothing of TikTok, because (see above) Boomer. But I have read that TikTok refugees are flocking to another of ByteDance’s apps, which surely was not the idea?

According to Mark Zuckerberg, head of Meta and Facebook, this is the year when AI begins to take the jobs of midlevel computer engineers and write useful code for corporations. I bet that’s not the kind of AI which is free and likes to summarize my email chains. Someone will monetize it! Wait. Everyone will monetize it!

For the week ending on January 17th, the Standard & Poor’s 500 finished at 5,996, the Dow Jones Industrials at 43,487, and the Nasdaq Composite Index at 19,630. The yield on the ten-year Treasury Note closed at 4.609%. U.S. crude oil cost $77.80 per barrel, N.Y. gold cost $2,708.00 per ounce, and one Euro was worth $1.04.

Elizabeth E. Cook
Partner, Diastole Wealth Management

News and information presented here was gathered from sources believed, but not guaranteed, to be reliable, including (but not limited to) Axios, Barron’s, Bloomberg, MarketWatch, Yahoo Finance, Business Insider, Morning Brew, The Economist, The New York Times, The Wall Street Journal, The Washington Post, USA Today, CNN, CNBC, The Bureau of Labor Statistics, Reuters, and The Associated Press. If you have questions, please call us at 203.458.5220, or reply to this email to reach me, Liz Cook. Please note that I am an entirely separate person from Beth Eden (my picture is below)!

It was the 70s. Kool-Aid was cool. And red dye #2 was banned for being a known carcinogen. So why has it taken fifty years to ban red dye #3?. You officially have until January 15th, 2027 to stuff yourself with red jelly beans, maraschino cherries, and red hots. Go ahead and get started!

The National Archives would like to find amateurs who can read cursive to “translate” old documents. If you are ready and willing, please contact them. Me (with my hand way up in the air): oh oh oh oh. Yes! Boomer!