Happy Thanksgiving

“Be present in all things and thankful for all things.” -Maya Angelou

As the holiday season approaches, my Team and I want to take a moment to extend our warmest wishes to you and your family. Thanksgiving is a time for reflection, gratitude, and the joy that comes with being surrounded by loved ones. It’s a season that invites us to pause and cherish the abundance we have in our lives.

In this spirit, our theme for this month’s newsletter is “Everything in Moderation” written by our research partner Kostya Etus, CFA®, Chief Investment Officer at Dynamic Investment Management.  Just as Thanksgiving teaches us the importance of balance in enjoying our meals and gatherings, it’s also a reminder of the balance we strive for in our financial endeavors.

May this holiday season bring you peace, joy, and a renewed sense of gratitude. As we celebrate the wealth of life, both financial and personal, here’s to cherishing every moment with family and friends.

 

Wishing you a Happy Thanksgiving!

A Resilient Economy Spells ‘Higher for Longer’

We have had an interesting couple weeks in the markets. First, the week of the election we had a strong market rally of close to 5% for the S&P 500 with what has been called the “Trump Trade”. The following week, we had the “Trump Fade”, as the market experienced about a 2% drop as investors digested potential government policy implications, new inflation data and interest rate expectations.

Despite the volatility, the market is still up nicely for the year (ending Nov. 15, 2024) as we enter the holiday season which tends to experience seasonal support of continued strength. Let’s review some of the key factors impacting markets:

  1. Inflation Moderating: The top news last week was consumer price inflation (CPI) for October from the U.S. Bureau of Labor Statistics. Overall CPI ticked up to 2.6%, in line with expectations, but higher than the previous month at 2.4%. We have come a long way from the 9% readings we were hitting in 2022, but this last leg of the marathon seems to be persistent as we try and reach the Federal Reserve’s (Fed) target of 2%.
  2. Interest Rates Moderating: After the inflation report, Fed Chair Jerome Powell indicated there is no hurry to cut interest rates as the economy appears to be resilient. He reinforced the labor market remains healthy with a 4.1% unemployment rate, and economic growth is one of the strongest in the world. Market expectations are now pointing to a total of just three more interest rate cuts over the next year.
  3. Stock Market Moderating: While the stock market has continued to reach all-time highs this year, volatility has been rising. It may not be surprising to see some moderation over the next few months as investors patiently wait to get more clarity around fiscal policy and monetary policy factors driving returns.

That said, the holidays are around the corner…

The Santa Claus Rally

One of the key questions on investors’ minds is, can the stock market continue growing at its current pace? One view is that the market may be overheated, and it may not hurt to let some steam out of the engine. Alternatively, we have had negative returns in three of the last four weeks, and perhaps there is more room to grow going into year-end.

One factor supportive of continued strength nearing year end is seasonality. As previously discussed in June Market Update, “Are You Surprised by the Market?” there is an adage known as “Sell in May and go away” that suggests you come back just in time for the gifts the winter holidays have to offer.

Certainly, being away this summer would not have benefited investors, reinforcing the benefits staying invested, but let’s look at historic average monthly returns for the S&P 500 for hints of what we may be able to expect going forward:

  1. Higher Return Potential: The median monthly returns tend to suggest the winter months, generally returning more than 1% per month, tend to be more attractive than the summer months. That said, except for July, all months generate a positive return on average.
  2. Higher Positive Potential: The frequency of positive returns also tends to favor the winter months, particularly December with a whopping 83% positive return batting average. That said, all months are close to or more than the 50% mark.
  3. Staying Invested for the Long-Term: While some months may be stronger than others, the general trend is that markets tend to be positive over the long-term, regardless of the month. Likewise, over long periods of time, the market is certainly better than a coin flip. The best path to success is to stay diversified, stay balanced and stay invested to achieve your long-term investment goals.

Stay diversified, my friends.

Source: Bloomberg. 1988-2011. https://www.warriortrading.com/what-is-stock-market-seasonality/

As always, Dynamic recommends staying balanced, diversified and invested. Despite short-term market pullbacks, it’s more important than ever to focus on the long-term, improving the chances for investors to reach their goals.

 

Disclosures

This commentary is provided for informational and educational purposes only. The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. This is not intended to be used as a general guide to investing, or as a source of any specific recommendation, and it makes no implied or expressed recommendations concerning the manner in which clients’ accounts should or would be handled, as appropriate strategies depend on the client’s specific objectives.

This commentary is not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation. Investors should not assume that investments in any security, asset class, sector, market, or strategy discussed herein will be profitable and no representations are made that clients will be able to achieve a certain level of performance, or avoid loss.

All investments carry a certain risk and there is no assurance that an investment will provide positive performance over any period of time. Information obtained from third party resources are believed to be reliable but not guaranteed as to its accuracy or reliability. These materials do not purport to contain all the relevant information that investors may wish to consider in making investment decisions and is not intended to be a substitute for exercising independent judgment. Any statements regarding future events constitute only subjective views or beliefs, are not guarantees or projections of performance, should not be relied on, are subject to change due to a variety of factors, including fluctuating market conditions, and involve inherent risks and uncertainties, both general and specific, many of which cannot be predicted or quantified and are beyond our control. Future results could differ materially and no assurance is given that these statements or assumptions are now or will prove to be accurate or complete in any way.

Past performance is not a guarantee or a reliable indicator of future results. Investing in the markets is subject to certain risks including market, interest rate, issuer, credit and inflation risk; investments may be worth more or less than the original cost when redeemed.

Investment advisory services are offered through Dynamic Advisor Solutions, LLC, dba Dynamic Wealth Advisors, an SEC registered investment advisor. Photo: Adobe Stock

 

 

COVID-19 Relocation: How Post-Pandemic Migration Could Reshape New England’s Political Landscape

The COVID-19 pandemic has reshaped the way we live, work, and even think about where we want to reside. Remote work allowed millions of Americans to move away from congested urban centers, sparking demographic changes that could ripple through the political landscape for years to come. Nowhere is this trend more evident than in New England, a region known for its blend of liberal urban hubs and conservative rural areas. As new residents from blue-leaning cities settle in traditionally red or purple areas, the political map of New England could see significant shifts, influencing both local and national elections.

 

The Great Migration: A Broad Overview

 

In the wake of COVID-19, migration patterns across the United States shifted dramatically. Major metropolitan areas like New York City, San Francisco, and Boston saw waves of residents leaving for less densely populated regions. The reasons for this mass exodus were clear: people sought larger homes, access to nature, and lower costs of living, while remote work enabled them to keep their big-city jobs from a more tranquil setting.

 

This phenomenon wasn’t just limited to traditional suburban sprawl; many Americans relocated to entirely new states. A 2021 study by the Federal Reserve Bank of Cleveland found that interstate migration increased by 14% in 2020, driven in part by those fleeing densely populated cities. States like Texas, Florida, and Arizona saw some of the largest population increases, but the trend was also pronounced in New England, where towns in states like Connecticut, New Hampshire, and Vermont saw an influx of urban transplants, particularly from cities like New York and Boston.

 

The influx of new residents—many from Democratic strongholds—into more rural or traditionally conservative areas has the potential to alter voting patterns and sway the outcomes of elections. New England, a region with a history of political diversity, could be one of the key areas where these shifts play out.

 

Connecticut: A Changing Suburban Landscape

 

Connecticut, long known for its split between Democratic-leaning cities and more conservative suburbs, is seeing some of the most noticeable shifts. The state became a refuge for residents fleeing New York City, with towns along the Gold Coast and the Connecticut shoreline experiencing a surge in home sales and population growth. Towns like Greenwich, Westport, Guilford, and Madison have been some of the biggest beneficiaries of this trend.

 

Before the pandemic, many of these suburban areas leaned conservative, reflecting their higher-income demographics and suburban values. However, as new residents—many of whom are more progressive—move into these areas, the political balance could begin to tip. Recent elections in towns like Westport and Darien have already shown signs of increased Democratic support, particularly in local races like school boards and town councils.

 

Looking ahead, this shift could extend beyond local elections to state and national races. In Connecticut’s gubernatorial and congressional elections, we may see previously competitive suburban districts move more decisively into the Democratic column, further solidifying the state’s status as a blue stronghold in future elections.

 

New Hampshire: A Key Swing State in Flux

 

New Hampshire is one of New England’s most politically diverse states and a crucial swing state in national elections. Its unique blend of libertarian-leaning conservatives and a strong progressive base, especially in cities like Manchester, has made it a battleground in recent elections. But the post-pandemic migration could shift that dynamic.

 

As more Massachusetts residents move across the border into New Hampshire’s southern towns, such as Nashua and Salem, the influx of Democratic-leaning voters could challenge the state’s delicate political balance. Traditionally conservative areas could become more competitive, especially as these new residents participate in both local and national elections. In a state where margins are often razor-thin, even small demographic changes could have outsized political consequences.

 

This trend could be especially important in New Hampshire’s congressional races, which have historically been tight. Democrats currently hold both House seats, but a shift in voter demographics could either reinforce their hold or make races even more competitive, depending on how new residents align with their adopted state’s politics.

 

Vermont and Maine: Reinforcing the Blue Wave

 

Vermont and Maine are two states with long histories of rural conservatism but have shifted more to the left in recent decades. Vermont, known for its progressive politics and leadership from figures like Senator Bernie Sanders, has long attracted liberal-minded individuals looking for a slower pace of life combined with a progressive ethos. The post-pandemic migration has only accelerated that trend. New arrivals to Vermont from cities like Boston and New York are likely to further reinforce its status as a solidly Democratic state.

 

Maine, however, presents a more nuanced picture. Although it has a reputation for independent-minded voters and a mix of rural conservatism, Maine’s larger cities, particularly Portland, have leaned more Democratic in recent years. With an influx of new residents—often with more liberal leanings—the state could see a further leftward shift. This trend is already evident in its presidential elections, where Maine has consistently voted for Democratic candidates, although the state’s more rural Second Congressional District remains competitive for Republicans.

 

The expansion of Portland’s progressive influence into more rural areas could also affect down-ballot races, making it harder for Republicans to win statewide elections or control key legislative seats.

 

Massachusetts and Rhode Island: Solidifying the Liberal Stronghold

 

Massachusetts and Rhode Island are already deeply blue states, and the demographic shifts brought on by COVID-19 are unlikely to change that. In fact, the pandemic may have further solidified their Democratic status, as cities like Boston and Providence saw residents move to nearby suburbs or smaller towns while retaining their political identities. The political influence of these urban-to-suburban migrations is likely to reinforce the liberal leanings of these states, ensuring that they remain Democratic bastions in both state and national elections.

 

Broader Implications for National Politics

 

The demographic changes across New England reflect a larger national trend of suburban and rural areas becoming more politically diverse as urban residents migrate outwards. As we approach the 2024 elections and beyond, these population shifts could have a profound impact on the political landscape—not just in New England, but across the country.

 

For Democrats, the influx of progressive voters into traditionally conservative or swing areas offers the potential to expand their reach in regions that have been difficult to win. For Republicans, it presents new challenges, as they work to maintain control in areas experiencing demographic shifts that may not favor their policies.

 

In New England, where the balance between urban liberalism and rural conservatism has always been delicate, the COVID-19 migration could bring lasting changes, transforming purple districts into blue ones and turning competitive races into landslides. As these trends continue to unfold, the political map of New England may look very different in the years to come.

 

In summary, the pandemic-induced migration wave has the potential to reshape New England’s electoral landscape, with significant ramifications for local, state, and national elections. Whether these changes will lead to more solidly blue states or create new battleground areas remains to be seen, but one thing is certain: the political map of New England is evolving.

scales

The Impact of Government Price Controls on Goods: A Capitalist Perspective

Government price controls have long been a tool used by policymakers to manage the affordability and availability of essential goods. Historical instances reveal how these controls can shape market dynamics, often sparking debates among economists, business owners, and policymakers. This article will examine past instances of price controls in the U.S., evaluate their outcomes, and discuss the pros and cons from a capitalist perspective.

Historical Examples of Price Controls in the U.S.

1. World War II Era:

During World War II, the U.S. government implemented extensive price controls to manage wartime inflation and ensure the affordability of essential goods. The Office of Price Administration (OPA) was established to set price ceilings on a wide range of products, from food to fuel.

Outcome: While price controls helped to prevent runaway inflation during the war, they also led to shortages and black markets. Rationing became necessary as suppliers were unwilling or unable to sell at the controlled prices.

2. The Nixon Administration:

In the early 1970s, President Richard Nixon imposed wage and price controls to combat inflation. The Economic Stabilization Act of 1970 granted the government the authority to freeze wages and prices.

Outcome: Initially, these controls managed to curb inflation temporarily. However, when controls were lifted, pent-up price pressures led to a dramatic spike in inflation, known as stagflation.

3. Rent Control Policies:

In several major cities, such as New York and San Francisco, rent control laws have been used to keep housing affordable in high-demand areas.

Outcome: While beneficial to existing tenants, rent controls have often been criticized for reducing the overall supply of rental housing. Property owners may be disincentivized to maintain or build new rental properties, leading to a decline in housing quality and availability.

Pros of Price Controls

1. Inflation Control:

In times of economic crisis or war, temporary price controls can help to mitigate inflationary pressures, making essential goods more affordable for the general population.

2. Short-term Stability:

By stabilizing prices, governments can prevent panic buying and hoarding, ensuring fair distribution of scarce resources.

3. Social Equity:

Price controls can protect low-income households from price gouging, promoting social equity during times of crisis.

Cons of Price Controls

1. Market Distortions:

Price controls interfere with the natural supply and demand balance, leading to inefficiencies and unintended consequences like shortages and black markets.

2. Reduced Investment:

When prices are artificially suppressed, businesses have less incentive to invest in production and innovation, potentially leading to long-term stagnation in supply.

3. Quality Deprivation:

Producers forced to sell at lower prices may cut corners on quality to maintain profitability, leading to an overall decline in product standards.

 

While price controls can offer short-term relief during economic crises, they often come with significant long-term trade-offs. From a capitalist perspective, the drawbacks of market distortions and reduced incentives tend to outweigh the benefits of stability and affordability. Striking the right balance requires careful consideration of the economic context and a nuanced approach to implementation.

We challenge business owners and policymakers to engage in dialogue to find innovative solutions that address economic challenges without undermining market principles. By fostering a collaborative environment, we can ensure that economic interventions promote both stability and growth.

 

 

man sitting at a desk on a laptop

The Roaring Influence: Analyzing @roaringkitty’s Impact on GME and Market Implications of His Resurfacing

By Vince Esposito, Managing Partner

In early 2020, the financial world was shaken by an unprecedented event—the short squeeze of GameStop (GME). At the heart of this financial phenomenon was Keith Gill, known by his online alias @roaringkitty. His influence on the GME short squeeze and the subsequent implications for the market have been profound. As he resurfaces, it’s crucial to analyze his impact and consider the potential ramifications.

The GME Short Squeeze: A Revolutionary Moment

@roaringkitty played a pivotal role in the GME short squeeze. His analysis and social media presence galvanized a community of retail investors, leading to significant market movements.

Market Dynamics

  • The GME short squeeze was fueled by an unusual market condition where a significant portion of GME’s shares were shorted. @roaringkitty’s detailed analysis and bullish stance on GME drew attention to this imbalance.
  • Retail investors, motivated by his insights and the potential for substantial gains, bought into GME, driving up the price and forcing short-sellers to cover their positions at a loss.

Public Perception

  • @roaringkitty’s narrative resonated with many retail investors who saw the GME situation as an opportunity to challenge traditional Wall Street practices.
  • He became a symbol of the “little guy” taking on the big hedge funds, fostering a sense of camaraderie and collective action among retail investors.

Regulatory Response

  • The GME short squeeze prompted regulatory bodies to scrutinize market practices and consider reforms to ensure fair trading conditions.
  • Discussions around market manipulation, the role of social media in trading, and the transparency of short-selling practices intensified.

The Market Implications of @roaringkitty’s Resurfacing

The recent resurfacing of @roaringkitty has sparked renewed interest and speculation. What might this mean for the markets?

Investor Sentiment

  • @roaringkitty’s return has the potential to reignite the enthusiasm and confidence of retail investors.
  • His presence could lead to increased market activity as investors seek to capitalize on his insights and follow his lead.

Market Volatility

  • With heightened attention on @roaringkitty, markets may experience increased volatility. Retail investors, driven by the excitement of his return, might engage in speculative trading.
  • This could lead to sudden price movements in stocks or sectors he discusses, similar to the GME scenario.

Regulatory Scrutiny

  • Regulators are likely to monitor @roaringkitty’s activities closely. His influence on market movements has already prompted discussions on market regulation.
  • Future regulatory measures could focus on the transparency of social media influencers in finance and the protection of retail investors.

Key Insights and Takeaways

  • Power of Social Media: The GME short squeeze highlighted the significant impact social media can have on financial markets. @roaringkitty’s ability to rally retail investors showcases the democratization of market information.
  • Retail Investor Influence: Retail investors, once considered passive market participants, have demonstrated their collective power to drive substantial market movements. Their influence is now a critical factor in market analysis.
  • Regulatory Evolution: The events surrounding GME and @roaringkitty have accelerated the conversation around market regulation. Expect ongoing discussions and potential reforms aimed at balancing market integrity with investor freedom.

@roaringkitty’s impact on the GME short squeeze was a defining moment in financial history. As he reemerges, the market is poised for potential shifts in sentiment and volatility. While his actions and insights continue to be a source of fascination, it’s essential for investors and regulators alike to remain vigilant, ensuring a fair and transparent market environment. We recommend you consult your trusted Financial Advisor before making any investment decisions.

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