Weekly Reflection for March 8, 2024

The Week - An Update in Charts

Week-to-date returns for the major U.S. averages are lower since last Friday. After some weak news on Tuesday (manufacturing and service sector slips) plus Apple's tumble (iPhone sales headwinds and competition woes), markets could not hold onto gains. News of slightly higher unemployment in February helped lead the Friday pullback.

The adage "the stock market is not the economy" is regularly repeated because so often "Wall Street" is disconnected from what consumers are experiencing on "Main Street". While the U.S. market and stocks are relatively aligned, it is noticeable that other places are out of sync.

Japan and the U.K. have both entered recessions with rising unemployment

and falling GDP. Someone forgot to tell their stock investors though. The Nikkei is near all-time highs. While the FTSE 100 is not blowing away anyone with huge returns, it certainly does not look worrisome.

Although there are a few weak patches, notably in Germany and Austria, the European Union is satisfied with their inflation and GDP projections. Inflation looks to fall even more than expected a few months ago and growth will be higher into 2026. The European Central Bank (ECB) debate is as to whether to cut interest rates in April or June. Markets expect a full 1% cut in E.U. rates by the end of 2024.

Stock buybacks are controversial. Should a company with publicly-traded stock use their cash flow for buying shares on the open market instead of reinvesting in products, processes or employees? The beneficiaries are usually those with the most shares - executives and the board, not their customers or their employees. Nonetheless, buybacks are hugely popular and Goldman Sachs expects over $1 trillion to be spent over the next year. The action does signal that companies have confidence in ever-improving profits and net cash flow.

The Biden Administration's new taxation on buybacks has obviously done nothing to deter them. The goal of the 1% tax, which raised $8 billion last year, is to incentivize corporate dividends over buybacks, which are currently cheaper in the long run for businesses.

Wars, weather and politics are putting the world on a course for food insecurity in the coming years. It is a "tomorrow" problem that European Union officials are planning for now so that they are prepared.

Even Europe, which ranks very high in food security, sees a world in which the worst could happen and happen all at once. There are plenty of food disasters happening already.

Soy crops are failing in Latin America due to weather patterns and Ukrainian and Russian grain farmers are at war instead of planting their crops. Overfishing in Southeast Asia and the Mediterranean have been decimating supplies for decades.

Officials are focused on prevention, self-reliance and diversification. Today Finland, Ireland and Norway round out top three most food-secure countries. The U.S. comes in #13 behind Canada and the U.K.

The oldest Baby Boomer today is 78 years old; the very youngest will turn 60 in 2024. Some 80% of this group is already retired and the wave of retirees is picking up. As of last December there were 2.7 million more permanent retirees than economists had even forecast. "Excess" retirees they are being called.

The excess is partly driven by an overhang of the Covid conditions – working from home was convenient and people are not as keen on heading back into the office. A decrease in inflation and interest rate expectations helps tip the scales towards quitting. Add to that 401(k) balances which have been bolstered by the last 12 years of strong stock market returns and it becomes an easier decision for many. "Peak” retirement in numbers is probably still a few years out.

Celebrating Women

March 8th, today, is International Women’s Day. Around the world it is a time of both celebration and protest. Several countries have declared today a national holiday, including some that may surprise you, like Russia, Belarus, Cuba, and Mongolia. Women get a half-day off of work in China. Italians celebrate by giving flowers. In some countries Women's Day is more like Mother's Day with a focus on the importance of mothers. In the U.S. we do

not celebrate the day as much as the month, with acknowledgement of our progress, and the work ahead, with news reports, movies, in the arts and in businesses. In other regions, there is less festivity and more anger.

Today in Afghanistan, a small handful of women were courageous enough to stand in the streets and protest their brutal Talibani government, which does not allow women to get more than an elementary school education, to travel without a male companion, to visit parks, to go to a beauty salon, to use fitness facilities or go to fairs. In Spain and Mexico women took to the streets to protest the persistent wage-gap and pervasive violence against women, which the World Health Organization calls a major public health issue around the globe.

While we know that the poorest and least democratic countries in the world also have the worst human and women's rights, it seems that the richest countries could do better by their women as well. Back in 2013 The Economist began keeping stats, with a focus on the 29 members of the OCED, basically a rich kid club for the most prosperous nations. Using the 10 factors measured, the OCED group is worse-off than in 2016. Women in Israel and Hungry have experienced the biggest losses while the U.S. modestly declined.

American women have improved in education (more women graduate college than men), in board seats (32% are held by women) and in the workforce (with slightly higher numbers), but the wage gap persists (women are paid 17% less for the same work). Fewer are taking the exams for graduate degrees and, perhaps this is a direct link, men hold more managerial positions than women. Even as our childbirth number drops, for those who do start families, nothing has improved with the cost and challenges. Net child care expenses are 32% of the average wage and paid family leave is still dependent on one’s employer benefits. These struggles are directly tied to more women continuing to leave the workforce, sometimes temporarily, sometimes forever.

So celebrate International Women's Day as an important reminder of how far we have come and how much farther we can and should go.