Some interesting notes we’d like to share…

• The stock market declines by about 10% every two years. The next drop will likely be a short-term fluctuation, not a full bear market.
• Henry Ford once predicted that only one million cars would be sold in the U.S. over the course of the 20th century. Today, a million cars are sold every three weeks.
• In current recession/pandemic data, jobless claims remain more than double April 2019 levels. However, contract and part-time employment, weekly retail sales, and railcar traffic have already surpassed 2019 figures.
• Interest rate cycles tend to be long. The 40-year declining interest rate cycle appears to have ended. The previous rising cycle also lasted 40 years. While it’s too early to confirm a trend, early signs are flashing caution. Bondholders, take note.
• Annuities provide a great return — for the insurance company. But we can still benefit from the same structure. When we take out a mortgage, we’re effectively selling an annuity to the lender. At today’s low rates, a mortgage can be viewed more as an asset than a liability.
• We’ve long used Quality as a core investment factor. Twenty-five years ago, no mutual funds or ETFs had “Quality” in their names. Everyone assumed that, as with bonds, higher quality in stocks meant lower returns. But our backtesting — and now broader research — proved otherwise. Today, Quality is a recognized positive factor, and 142 funds proudly carry it in their names.
• The average home sale price is up 17% over last year. For new homes, prices rose just 1%, despite lumber costs adding $24,000 per home. Inflation — should it accelerate — may pressure housing. However, falling lumber prices could help offset higher mortgage rates. Historically, higher inflation has sometimes *increased* home buying as a hedge against future price increases.

Physicist Niels Bohr once said, “Prediction is very difficult, especially about the future.” Physics is simple compared to finance, where every forecast could be followed by “…on the other hand.”

Katz Family Financial