Gill Capital Partners Thanksgiving Update
As we approach Thanksgiving, we want to take a moment to express how thankful the Gill Capital Partners team is for all of you. Though the past few years have presented many challenges, our gratitude remains. We feel fortunate for the relationships we have with our clients, friends, partners, and colleagues. We hope everyone is able to be with their friends and family this Thanksgiving or celebrate in their own special way. There is certainly plenty to talk about over Thanksgiving dinner and we wish you all a modicum of grace at your dinner table. We will get into the news on the market and economic front, including updates on inflation, Federal Reserve policy, and crypto, but first, a few interesting facts about Thanksgiving:
Butterball, the popular turkey supplier, opens a turkey hotline each year in November to answer turkey related questions. They average over 100,000 calls over the holiday season.
Black Friday isn’t only big for retailers. According to Roto-Rooter, the day after Thanksgiving is the busiest day of the year for plumbers.
“Jingle Bells” was originally a Thanksgiving song. Written by James Lord Pierpont in 1857, the song was not meant to be about Christmas. It was originally titled “One Horse Open Sleigh” and was meant to be sung on Thanksgiving.
According to a Harris Poll, a significant majority (81%) prefer Thanksgiving leftovers over the Thanksgiving meal itself. Also, Millennials look forward to the turkey component of the meal less than any other age group.
Sarah Josepha Hale is credited with making Thanksgiving a Federal holiday. She petitioned the government for 17 years and finally convinced Abraham Lincoln in 1863 to recognize the holiday. Ironically, Sarah is the same person who wrote the song “Mary Had a Little Lamb.”
Inflation & Interest Rate Update
We received some welcome news on the inflation front this month. The monthly report on consumer inflation (CPI) showed that inflationary pressures cooled once again in October, coming in below market expectations.
As shown above, the CPI increased by 7.7% year over year in October, down from 8.2% in September and 9.1% in June, which was the highest in four decades. The “Core CPI,” which excludes food and energy prices, came in at 6.3% over a year ago, also down from last month and the June high. These were both lower than forecasted, stocks surged and bond yields dropped on the news as traders welcomed signs of ebbing price pressures. Looking at the components, prices continued to decline for energy, vehicles, and apparel, while food and shelter prices continue to remain stubbornly high.
Our view – While inflation is clearly trending lower, we are still talking about 7+% year over year inflation. We are pleased to see a better-than-expected report for October, but we will need to see even more cooling for the Federal Reserve to be satisfied. They have been clear that they will require a consistent trend of lower inflation before they will be able to moderate their current path. Based on all of the data we are watching we are optimistic that we will continue to see inflation trend in the right direction in the months ahead. Market expectations and forward forecasts call for a return to inflation in the 4% range by the middle of next year, which would be a much more normal environment as compared to what we have seen this year. We believe we will continue to see inflation moderate as the aggressive actions of the Federal Reserve, combined with normalizations of supply chains are beginning to have a meaningful impact on prices across the economy such as housing, vehicles, and retail goods. For the markets, this is good news as the market is seeing a light at the end of the tunnel with respect to interest rate increases, and we agree, barring an upside surprise in inflation. The Federal Reserve’s most recent forecast projects a terminal rate in the Fed Funds rate of 4.6%, and bond markets have already priced this in. What does this mean? It means that bond yields may not move much higher from here if at all, again, barring a surprise in the inflation data.
Crypto Update
Crypto markets took another tumble recently and are currently at or near the lows for the year, with major crypto currencies like Bitcoin down between 60% and 70% year to date. The recent selling pressure has come on the back of a bankruptcy filing by one of the largest exchanges, FTX, with fraud looking more and more likely.
Our view – We get a lot of questions about crypto and Bitcoin. While we understand crypto, we do not focus our research efforts on this asset class. We believe there is important technology that will present investment opportunities in the future. That said, we do not currently recommend crypto for a myriad of reasons, including extreme volatility, lack of regulation, and tax issues. The crypto market is unlikely to remain unregulated for much longer given the recent FTX news, and the potential fraud issues involved. That being said, we will continue to watch, learn, and keep an open mind.
We hope everyone has a wonderful Thanksgiving. Stay healthy, safe, and grateful.
As always, please let us know if you have any questions or concerns, or if we can provide assistance with any other financial planning matters including education, taxes, insurance or estate needs.