Wedbush Wraps Up Women’s History Month with a Speak Up, Stand Out Workshop
On March 31, the Wedbush Organization of Women (WOW) concluded Women’s History Month with an interactive workshop. The virtual session expanded upon our International Women’s Day event, which encouraged colleagues, especially women, to communicate their value when the stakes are high. Nancy Medoff, Coach and Founder of Athenawise, was once again our featured speaker. Medoff, a global persuasion and negotiation expert, shared an insightful presentation, aptly named “Unmute Yourself, Speak Up and Stand Out.” Medoff began the presentation by discussing the three principles of persuasion. First is “The Rule of Three,” an idea that adults retain information best in sets of threes. Second, Medoff advised that colleagues should not only talk about themselves in conversation, but rather focus on listening to their audience. The third principle of persuasion was the “So What?”, or the idea that it is essential to always communicate why your skills are important to the firm. The next part of the presentation included an exercise where the audience practiced their power positioning statements. Several brave and empowered employees spoke up and shared their positioning statement. The audience was then divided into different networking groups to discuss their own personal power statement with colleagues. To conclude, Nancy Medoff ended the workshop by emphasizing the importance of “raising your hand” and speaking up. She also shared a quote from Sheryl Sandberg: “If you’re offered a seat on a rocket ship, you don’t ask what seat. You just get on.” Kirsten Fraunces, EVP and Head of Capital Markets, presented closing remarks about our diversity networks that are in place “to create community” and a stronger future for the firm. Explore the ways our firm supports the advancement of female colleagues through the Wedbush Organization of Women (WOW).
Health and the Economy
As the U.S. and the world move beyond the devastating impacts of the pandemic, it is hoped that this will have a positive impact on our economy. The pandemic became widely publicized in March of 2020. Afterward, the stock market plunged and many sectors of the economy declined or shut down altogether. Many states instituted drastic measures to combat the virus. Fast forward to today and we saw the stock market recover in the latter part of 2020 with the S&P 500 gaining about 18% for the year. Many major market indexes remain at or near record high levels. We are seeing substantial rollouts of COVID vaccines across the country, though distribution is a bit uneven among various states and segments of the population. Current Restrictions and Reopening Plans Current restrictions on activity and plans to reopen the economy vary widely around the country. Texas notably announced an end to their statewide mask mandate. Many states and local areas have begun to open up in terms of capacity limits at restaurants and for other types of gatherings. Plans for further reopening vary as well, with many areas citing the need to meet benchmarks in terms of COVID hospitalization rates, positive tests or other metrics. On the flip side of this, some experts have urged caution saying even with the expansion of vaccine distribution, we are not out of the woods yet and could see a spike in cases. Vaccine Supplies and Distribution The Biden administration has pledged to greatly increase the supply of vaccines to the state and has set aggressive targets for the number of doses given. As of late March, about 130 million doses of the various versions of the vaccine have been administered. The total population of the U.S. is about 331 million. A number of states have expanded the group of individuals eligible to receive the vaccine from those who are age 65 and over plus essential workers, which was the criteria in most states at the beginning of the process. Many analysts tie any rebound in the economy to the ability of the U.S. and the rest of the world to beat the pandemic. Getting not only our citizens vaccinated, but getting the vaccine distributed and administered globally has been cited by President Biden as a key priority. The Spanish Flu and the Economy According to data cited by the National Bureau of Economic Research, the Spanish Flu pandemic of 1918 resulted in a 1.5% decline in the U.S. GDP and a 2.1% decline in overall consumption. This is lower than researcher’s estimates of a 6% decline in GDP and 8% decline in consumption in the typical country over the same time frame. These global numbers are in line with what occurred here in the U.S. during the Great Recession of 2008-09. While our economy is vastly different than it was in 1918 and we don’t have the final economic numbers from the pandemic as of yet, there are some forecasts that show some dire numbers. The IMF forecasts that when the numbers for 2020 are tallied, on average the GDP for developed nations around the world will have fallen by 4.7% with emerging markets countries declining by over 8%. China is an exception here, with their economy expected to show growth. There have been some dramatic effects on U.S. businesses. For example, ticket sales in movie theaters were about $100 million for the first weekend in March of 2020, considered normal. The following weekend they had declined by 50% and had effectively evaporated by April of 2020. It remains to be seen if this industry can fully reopen and recover. Industries like travel and restaurants have been ravaged. Both are just starting to come back. On the other hand, so-called stay-at-home businesses have prospered. Amazon, Zoom and other companies of this ilk have prospered. Beyond this, the stock market certainly has staged a recovery from its lows in early to mid-2020 to finish the year on a strong note. Those increases have carried over into 2021, though in some cases the companies and industries leading the markets have. Where the economy goes from here remains to be seen, but there is much hope for positive growth as more and more Americans become vaccinated and life returns to a more normal state. Looking to build a financial plan based on your goals while considering market trends and risk factors? Click here to check out our approach to Wealth Management. Disclosure These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice.
Inflation: How Does it Happen and Should I be Concerned?
Inflation is defined as the rate of price increases on goods and services in the economy. Inflation can occur for a number of reasons. What Causes Inflation? Inflation can have many causes. It might be a function of changing prices for ingredients or raw materials that are used to produce something. This might be a food product, or it could be an industrial component. Manufacturers will typically pass along increases in their costs to the consumer of the product to the extent that they can. Rising interest rates can increase borrowing costs for companies, this is a cost they will pass on to their customers if they can as well. Monetary Policy The Fed’s monetary policy is currently centered around keeping the federal funds rate near zero with a goal of keeping inflation around 2% over the long run. There has been some concern from investors in recent weeks as the rates on the 10-year Treasury bond has creeped up a bit. Their concerns center around whether these rising rates are a signal of rising inflation. While the rising rates are not an actual indicator of rising inflation, they may be a sign that investors are anticipating a rise in inflation. Fed Chairman, Jerome Powell indicated recently that he has not seen broad signs of inflation at this point. Analysts have mixed feelings about where we are headed. There is sentiment that increases in the rate on the 10-year are a result of economic growth plus the impact of the recent stimulus bill. Role of the Federal Reserve in Combating Inflation Arthur Bass, Wedbush’s Managing Director, Fixed Income Financing, Futures, and Rates says, “ It has now been a year since the Fed reduced its fed funds target range to 0-25 bp at the start of the Covid pandemic. The Fed has also been purchasing $120 billion per month in Treasury and mortgage securities and has sponsored numerous other programs to provide stability to financial markets. These efforts have been successful in helping the economy weather the Covid shutdowns and dislocations. With the success in vaccinations and recovery in many sectors of the economy, there is now increasing attention on when the Fed will move short term rates off of the zero lower bound. These concerns have increased since the passage of the $1.9 trillion stimulus plan, on top of the $600 billion stimulus plan passed in December. While 2-year yields are little changed since the start of the year due to expectations the Fed will remain on hold, 10 and 30-year yields are about 75 bp higher as the yield curve has steepened.” Bass adds, “The key to whether the Fed’s projections adjust to the market’s or vice versa will depend upon the continued growth in the economy and realized inflation. Thus far, inflation indices have not reflected much price pressure, although a number of economists feel that CPI has been held back by the owner’s equivalent rent portion. Upcoming inflation numbers are expected to rise, and the Bloomberg Commodity Index rose 48% in the past year due to the strength in housing and several resource shortages. Monthly inflation indices turned negative for the first few months of the lockdowns a year ago, which will boost year over year comparisons. Fed Chairman Powell has mentioned these potential increases and has already termed them transitory. With fixed income investors fearing over-stimulation, the next several inflation releases will garner more than the usual amount of attention. The other major factor influencing interest rates will be the progress in developing an infrastructure plan and how it is financed. Longer term interest rates will most likely rise further if a good portion of the plan is not financed with other revenues and if it is pushed through in the same manner as the $1.9 trillion stimulus plan, through reconciliation.” How Stocks Respond to Inflation – Potential Impacts on Valuation While stocks are generally considered a hedge against inflation, the impact on stock prices has historically been mixed. Rising inflation can impact the ability of consumers to spend as their real purchasing power is reduced. This potentially could be a negative for stocks that depend on consumer purchases. We’ve seen recent rises in commodity prices, notably oil which has been reflected in rising prices as the gas pump. As the economy heats up, we may see both increases in inflation and interest rates. Some businesses will have trouble passing along the entire impact of these factors in the form of price increases. This could hurt the profitability of some companies and be reflected in their stock price. This could have a ripple effect on stock valuations, or at least change the sectors that exhibit market leadership in the future. Looking to build a financial plan based on your goals while considering market trends and risk factors? Click here to check out our approach to Wealth Management. Disclosure These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice.
Housing: Can the Market Continue to Grow?
Even amidst the economic devastation caused by the COVID-19 pandemic, the housing market in many areas of the country has boomed. There are a number of factors involved, most notably an imbalance in the supply of housing and the demand as well as historically low mortgage interest rates. Can the demand for housing continue to grow? Consumer Confidence in the Housing Market According to Jay McCanless, Wedbush’s Homebuilder Analyst, “Confidence has stayed high in the face of rising interest rates as evidenced by year-over-year declines in cancellation rates and steady order growth. Fannie Mae’s latest monthly home purchase sentiment index in February showed consumer sentiment has continued to improve since the COVID low in April 2020.” Housing Supply Low/Limited Even before the pandemic hit, the supply of housing was lower than the demand for it in many areas of the country. Since the onset of the pandemic, this imbalance has continued. We’ve seen a number of residents of urban areas look for homes in suburbs and outlying areas. At the same time, we’ve seen a lot of potential sellers who had considered listing their homes change their plans. McCanless says, “We think it should be a seller’s market for the foreseeable future which may result in further home price appreciation.” Trends in Pricing and Mortgage Rates Low mortgage rates have helped fuel the demand for housing. During 2020, mortgage rates hovered around 3%. The National Association of Realtors forecasts mortgage rates of 3.1% for 2021 with the Mortgage Bankers Association pegging their rate forecast at 3.3%. Real estate data firm CoreLogic reported a 7.3% increase in home prices for the 12-months ending in October of 2020. They expect this pace to cool a bit to 4.1% for 2021. Impact of Record Low Interest Rates on Demand These record low interest rates have helped fuel demand among homebuyers. According to the Mortgage Bankers Association: Mortgage applications jumped 33% in August 2020 compared to the prior year. They jumped 27% in November of 2020 compared to a year earlier. In September of 2020, the average home sold in 16 days compared to 28 days a year earlier. In 2020, about two-thirds of the people who purchased a home in 2020 made an offer on a house they had never seen in person. Pandemic Driven Home Buying – Need for Space Part of the demand for housing during the pandemic has been fueled by a need for more space. According to the National Association of Realtors 28% of homebuyers purchased a home with space for aging parents compared with 25% of buyers prior to the pandemic. The percentage of home buyers who purchased a home with room to accommodate adult children rose to 20%, up from 13% prior to April of 2020. According to Pew Research Center, as of July 2020 52% of adults aged 19-29 lived with their parents. This is the highest rate since the Great Depression. How Homebuilders are Responding to Demand Part of the supply problem is the shortage of new construction. U.S. home builders have struggled during the pandemic. Prices of many building materials have jumped, adding as much as $26,000 to construction costs of a new home according to the National Association of Home Builders (NAHB). In addition, many builders had not anticipated the level of demand and therefore shut down some operations and laid off workers as the pandemic hit. Many did not foresee the heightened demand for housing. McCanless notes, “Many homebuilders are growing their lot count and overall business in a prudent but expeditious manner. Most of the current management teams were around for the financial crisis of 2007-08. This has prompted management to reduce debt through this cycle and maintain discipline around land buying. Very different from the 2004-2006 era.” Market Outlook for 2021 We don’t make specific housing start forecasts, but McCanless indicates the economists we monitor are projecting 8% to 12% single family starts in 2021. He believes that seems reasonable. Much of course will depend on the direction of interest rates, the supply of housing and the health of the economy. Looking to build a financial plan based on your goals while considering market trends and risk factors? Click here to check out our approach to Wealth Management. Disclosure These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice.