MARKET WATCH
As the third quarter ended, we were once again forced to watch another episode of “Political Theater” regarding the possibility of a government shutdown. However, the continuing resolution, which was finalized over the weekend, ensured the budget battle will be kicked down the road for 45 more days until just before Thanksgiving. With debt piling up due to deficit spending of $1.3 trillion annually and interest rates continuing to rise, the need to curb spending at the federal level and increase Gross Domestic Product (GDP) is imperative.
The most recent GDP report, released on September 28, 2023, showed GDP increased at an annual rate of 2.1 percent in the second quarter of 2023, according to the third and final estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 2.2 percent. The next report concerning GDP will be released on October 26, 2023, and will give us our first glimpse of the economy’s growth in the third quarter of 2023.
Currently, the GDP of the United States is $26.854 trillion. United States government debt accounted for 122.8 percent of the country's GDP in June 2023, compared with the ratio of 121.3 percent in the previous quarter. The total debt of the United States, including Social Security and other trust funds is $33 trillion. For comparison, debt held by the public in fiscal year 1946, right after World War II, was about $242 billion, or one percent of what it is today. So, at the end of World War II with a GDP of just $228 billion, debt held by the public was 106 percent of the economy, or roughly 17 percentage points lower than its current level.
Some spending restraint would certainly help the Federal Reserve with its efforts to curb the inflation issue which has moderated since this time last year. For example, the Consumer Price Index (CPI) rose 0.6 percent in August after increasing 0.2 percent in July, the U.S. Bureau of Labor Statistics reported in mid-September. Over the last 12 months, the all-items index increased 3.7 percent. The all-items index, less food and energy, rose 4.3 percent over the last 12 months.
The Producer Price Index (PPI) increased 0.7 percent in August, after rising 0.4 percent in July, the U.S. Bureau of Labor Statistics reported in mid-September. The index rose only 1.6 percent for the 12 months ended in August. The PPI index, less food, energy, and trade services increased 0.3 percent in August, the same as in July. For the 12 months ended in August producer prices, less food, energy, and trade services, rose 3.0 percent.
The Personal Consumption Expenditures (PCE) price index released on September 29, 2023, which is the Federal Reserve’s favored gauge of inflation, increased 0.4 percent in August. Excluding food and energy, the PCE price index increased 0.1 percent. From the same month one year ago, the PCE price index for August increased 3.5 percent. Excluding food and energy, the PCE price index increased 3.9 percent from one year ago. As I noted last quarter, all three of these inflation figures show core inflation, the measure with food and energy removed, higher than the headline number.
After an impressive summer of stock market performance, the month of September cast its pall over the markets and took a bite out of performance. At the end of the third quarter the Dow Jones Industrial Average (DJIA)* finished at 33,507.50 and was up 1.09 percent year to date (YTD). The S&P 500* ended the quarter at 4,288.05, increasing 11.68 percent YTD. The NASDAQ* was the best performing index, bolstered by the hype regarding artificial intelligence (AI). The index closed the quarter at 13,219.32 with a 26.30 percent gain.
With September’s swoon, talk of recession and a bear market bounce have been bandied about with impunity. For the record, a bear market bounce is defined as an increase of 5 – 10 percent during a bear market and usually lasts a week or two. As discussed last quarter, we hit the low point for the S&P 500* in late September 2022 and now we could be due for a correction. Remember patience is a virtue.
We still need to get through October, yet!
WHAT IS BLOCKCHAIN AND WHY SHOULD I CARE?
If you own crypto assets, or are considering doing so, it’s valuable to have at least a basic understanding of blockchain, the technology protocol that powers most cryptocurrencies, including bitcoin and ethereum. FINRA and the BBB Institute are sharing some basic information about blockchain to help you understand how your assets are recorded, and also recognize and avoid investment schemes that might reference blockchain technology in an attempt to lure you into sending money.
Blockchain is a type of distributed ledger technology that uses computer code to create, maintain and update information shared by blockchain participants. Each "block" is a chunk of encrypted data, which is secured, or verified, by cryptography (the Greek word kryptos means hidden). A block might be one or more crypto transactions, or a loan payment, for instance. When one block of data is verified, it's then “chained” to the previous block, creating a blockchain.
Blockchain technology is an alternative to records maintained on a central database. With blockchain, risk and management are shared among numerous participants, each of whom has a "node" on the network and works collectively to maintain a permanent list of transactions. All parties on the network have access to a shared, identical, irreversible ledger of transactions. In other words, each node participates in the administration of the blockchain, including the verification of new additions to the blockchain.
Each node is also capable of entering new data into the database. To add new information to the blockchain, the majority of nodes must reach consensus, which enforces the network's security. Because there’s a permanent, transparent record of a transaction on the blockchain, the technology prevents a user from duplicating or double-spending their bitcoin.
Blockchain technology excels in moving data securely and transparently. It also offers data safeguards: Records on a blockchain are nearly impossible to alter, making it difficult for a central authority, or bad actor, to falsify or change information. Blockchain technology is also well-suited to tasks associated with identity verification and data tracking.
Because of these strengths, use of blockchain technology extends beyond the financial sphere. Hospitals use blockchain technology to safeguard patient data. Global vaccines, including COVID-19 vaccines, are being tracked and distributed with the help of blockchain technology. And individuals can employ blockchain solutions to verify home or land ownership and create a lifetime portable identity that doesn't depend on a centralized authority.
Blockchain has captured the attention of many people who view it as a potentially transformative technology. Unfortunately, fraudsters love to jump on trends, including blockchain technology, and aggressively target consumers with a variety of scams.
Be wary of companies that try to mislead or overstate their role in blockchain technology. Don’t invest based solely on a tout or tweet, which can easily overstate a company’s role in the blockchain arena. At the very least, read a company’s annual and quarterly reports. The Securities and Exchange Commission (SEC) has taken action against companies that have made false and misleading statements about blockchain technology in an effort to pump up the price of the stock.
This isn't a new kind of fraud, it's just the same old story where a company takes advantage of a hot trend, changes its name and makes baseless claims to attract new investors to pump (or ramp), then dump, the stock. Scammers have also posed as legitimate websites that provide services to crypto asset users to target unknowing users.
Most investors aren’t experts on blockchain technology, so it’s important to be skeptical when evaluating a claim made by a company about its entry into this arena. As a general rule, steer clear of unsolicited investment offers, and always take the time to verify whether the company has registered its securities with the Securities Exchange Commission.
Thanks to FINRA for providing this article on their website for Investor Protection.
While the SEC continues its attempt to crack down on the crypto industry, there are large investment companies working to bring Exchange Traded Funds (ETF’s) to market to help protect investors from fraud. Clearing firms are also studying this technology to store securities transactions. At this point in time, Registered personnel are still prohibited from making crypto recommendations to clients.
COMPANY INFORMATION
John H. Kaighn offers various products and services under the trade name of Jersey Benefits Advisors.
PO Box 1406
Ocean City, NJ 08270
Phone: (609) 827-0194
Fax: (856) 637-2479
Email: kaighn@jerseybenefits.com
http://jerseybenefits.com
John H. Kaighn is an Investment Advisor Representative & Registered Representative of Osaic Wealth, Inc. Securities and Advisory Services are offered through Osaic Wealth, Inc. Member FINRA & SIPC.
Osaic Wealth, Inc. is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic Wealth, Inc.
10 Exchange Place
Suite 1410
Jersey City, NJ 07302
Osaic Wealth, Inc. is not affiliated with Jersey Benefits Advisors or Jersey Benefits Group, Inc.
Insurance Services and Third Party Administration offered through Jersey Benefits Group, Inc., a licensed Insurance Agency in the State of New Jersey.
PO Box 1406
Ocean City, NJ 08226
Phone: (609) 827-0194
Fax: (856) 637-2479
Email: kaighn@jerseybenefits.com
http://jerseybenefits.com
All opinions expressed in this newsletter are independent of Osaic Wealth, Inc. and are solely those of John H. Kaighn and Jersey Benefits Advisors.
*The S&P 500, the DJIA, the NASDAQ and others referenced are unmanaged indices that are widely used as indicators of Market Trends. Past Performance does not guarantee future results and the performance of these indices does not reflect the fees and charges associated with investing. It is not possible to invest directly in an index.
*Dollar Cost Averaging through a systematic savings plan is an excellent way to build an account without a sizeable initial investment. Saving a portion of our pay each month is very important. Company sponsored pension plans are one method to save and should be used for retirement. Other systematic investment accounts, such as ROTH IRA’s, Traditional IRA’s, Coverdell Accounts, 529 Plans, Brokerage Accounts and Annuities can also be opened, and debited directly from checking or savings accounts. For more information, just call to set up an appointment. Referrals are always welcome.
John H. Kaighn
