The Markets- April 17, 2023
Keep your eye on the big picture.
Last week, there was nothing too surprising in economic and financial news.
Inflation eased, as expected, although it remained above the Federal Reserve (Fed)’s target rate.1 The Treasury yield curve remained inverted with three-month Treasury bills yielding more than 10-year Treasury notes, as they have been since November 2022.2 Also, we may be nearing an end to rate hikes around the world. Bloomberg News reported:
“With the first signs of dents in economic growth now visible, and fallout from financial-market tensions lingering, any pause by the Federal Reserve after at least one more increase in May could cement a turn in what has been the most aggressive global tightening cycle in decades.”3
Recession predictions for the United States continue to be prominent and varied, ranging from no recession to mild recession to deep recession over the next three to 18 months, reported Rafael Nam and Greg Rosalsky of NPR.4
Minutes from the Fed’s March meeting were released last week, and they show that Federal Open Market Committee members think tightening credit conditions could result in a mild recession later this year with recovery following in 2024 and 2025.5
While the idea of an economic downturn can be unnerving, recessions are part of every economic cycle. In times of uncertainty, it can help to step back and look at the big picture: the United States is quite remarkable.
“Nearly four-fifths of Americans tell pollsters that their children will be worse off than they are. In fact, America has sustained its decades-long record as the world’s richest, most productive and most innovative big economy. Indeed, it is leaving its peers ever further in the dust…American firms own more than a fifth of patents registered abroad, more than China and Germany put together,”6 noted Zanny Minton Beddoes of The Economist.
Economic and market uncertainty persists in the United States and elsewhere. We may experience a recession this year. We may not. Either way, it’s important to keep the big picture in mind. Recessions are one part of the economic cycle – expansions are another.
Last week, major U.S. stock indices finished higher, reported Nicholas Jasinski of Barron’s.7 In the Treasury market, yields on many maturities moved higher over the week.8
WOOLLY MAMMOTH MEATBALLS, ANYONE? In late March, the Nemo Science Museum in Amsterdam unveiled a remarkable exhibit, featuring a prehistoric alternative to beef, reported Helen Chandler-Wilde of Bloomberg.9 The not-for-consumption, lab-cultured display featured:
“…a cantaloupe-size globe of overcooked meat perspiring under a bell jar. This was no ordinary spaghetti topper: It was a woolly-mammoth meatball, created by an Australian lab-grown-meat company...using real mammoth DNA,” reported Yasmin Tayag of The Atlantic.10
The meatball was made by combining genetic material found in mammoths with elephant DNA, reported Bloomberg. It’s not the first time a food product has been made from a long extinct species. In 2018, a company produced mastodon gummy bears using gelatin made with mastodon DNA.9
The mammoth meatball is intended to draw attention to cultured meat. That’s the most palatable marketing term for cellular protein farming. The meat “is grown in anything from a test tube to a stainless-steel bioreactor. The process is borrowed from research into regenerative medicine, and in fact [Professor] Mark Post of Maastricht University, who cultured the world’s first burger in 2013, was previously working on repairing human heart tissue,” reported Amy Fleming of BBC Science Focus Magazine.11
Cultured chicken is already being served in Singapore, and the company that produces it has applied for approval in the United States.11
It’s unclear whether cultivating meat in labs will be more environmentally friendly than traditional farming, but it’s a growing segment of the biotechnology industry.11
Weekly Focus – Think About It
“Whenever you do a thing, act as if all the world were watching.”12
—Thomas Jefferson, founding father
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* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
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* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
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* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
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* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
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* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
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* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
Sources:
1https://www.bls.gov/news.release/cpi.nr0.htm
2 https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202304
3 https://www.bloomberg.com/news/articles/2023-04-09/end-may-be-in-sight-for-global-rate-hike-cycle-as-fed-nears-peak (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/04-17-23_Bloomberg_End%20May%20Be%20In%20Sight%20for%20Global%20Rate-Hike%20Cycle_3.pdf)
4 https://www.npr.org/2023/01/24/1150319679/recession-slowdown-inflation-interest-rates-jobs-employment-economy
5 https://www.federalreserve.gov/monetarypolicy/fomcminutes20230322.htm
6https://view.e.economist.com/qs=945bdf0fef48265431723f8e67a3bac4cc6ba8a11ea6c83eae540fb660de54a2e234d27f2f6d212e27090a5bb3dcbf42ddc5d1108092a006a4946b60f29207d5de2d32ef670336e44020ad0567abff5c (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/04-17-23_Economist_The%20Economist%20This%20Week_6.pdf)
7 https://www.barrons.com/articles/stock-market-needs-solid-bank-earnings-to-keep-rallying-so-far-so-good-47ae4d3e?refsec=the-trader&mod=topics_the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/04-17-23_Barrons_As%20Bank%20Earnings%20Go%2c%20So%20Does%20Stock%20Market_7.pdf)
8 https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202304
9 https://www.bloomberg.com/news/articles/2023-03-28/woolly-mammoth-meatball-created-by-lab-grown-meat-company-vow-foods?srnd=pursuits-vp (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/04-17-23_Bloomberg_Wholly%20Mammoth%20Meatball%20Created%20by%20Lab%20Food%20Tech%20Co_9.pdf)
10 https://www.theatlantic.com/health/archive/2023/03/woolly-mammoth-meatball-stunt-food-marketing/673578/
11 https://www.sciencefocus.com/science/what-is-lab-grown-meat-a-scientist-explains-the-taste-production-and-safety-of-artificial-foods/
12 https://www.brainyquote.com/quotes/thomas_jefferson_141477