MidSouth Week in Review
August 5, 2022

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

For the first week in August, the S&P was up 0.3%.  Crude declined to 87 vs. 130 in March vs. 123 in June.  Wholesale gas prices declined to $2.75 vs. $4.33 in June and have declined 50 straight days.  Unemployment dropped to 3.5% for the lowest level since the late 1960s.  Job openings dropped to the lowest level in nine months.  The average 30-year fixed mortgage rate declined to 4.99% vs. 5.30% the previous week.  The 10-year Treasury bond yield decreased to as low as 2.60% before rising.  Grocery sales at Dollar General and discount stores increased 71%.  Gold surged from a July low of $1677 to $1809.  Sources:  Wall Street Journal and New York Times

Declining Bond Yields – The U.S. stock indexes are up nicely from their June 16 lows (hit a couple of days after the peaks on Treasury yields).  In particular, the benchmark 10-year note’s yield has gone into reverse, falling 89 basis points, to 2.60% this week, from its peak at 3.49% on June 14 – Barron’s ….. Bloomberg says a 2% U.S. 10-year Treasury bond yield is possibly within the next six to twelve months.

Old And Tired Securities – like old friends are the best.

The Dollar – is the strongest it’s been in decades and will keep strengthening against most foreign currencies through the end of the year.  Investors have flocked to the Dollar as a source of stability amid weaker global economic conditions – The Kiplinger Letter

Downtown Working – The retreat from working daily at the office has reduced the appeal of living near it.  A Brooking Institute analysis of census data shows that 42 of 48 urban and counties, including sunbelt ones such as Dallas and Miami-Dade, lost population from July 2020 to July 2021 – Wall Street Journal ….. Nashville lost 1% of its population in 2021.

Interest Rates – Two government reports show continued increases in wages and inflation, which observers say make a 75-basis point interest rate increase likely in  September – Financial Times

State Population Changes – July 2020 – 2021.  Gainers – Florida 220k, Texas 93k, North Carolina 89k, South Carolina 65k, Tennessee 63k.  Losers - California -367k, New York -352k, Illinois -122k – National Census Bureau

Inverted Yield Curve – Each of the eight previous recessions in the U.S. have been preceded by an inverted yield curve.  As of last Friday, the 2-year note yield had exceeded the 10-year note yield for 18 consecutive trading days – Treasury Department

Housing – The signs of a slowdown are multiplying:  Listings are up, buyer traffic is down a lot.  Inventories are up relative to demand, sellers are lowering their asking prices.  Expect all of these trends to continue.  Higher mortgage rates are the main reason for the end of the housing boom – The Kiplinger Letter 

Covid – The pace of Covid deaths has remained steady since May at about 400 a day.  In July, more than 12,500 died of Covid.

Walmart – The world’s biggest retailer slashed its profit forecast for the second time in two weeks.  Shoppers are becoming more thrifty because of high inflation and spending more on things they need, such as food and consumer staples – Bloomberg ….. Walmart is cutting about 200 white-collar workers at its headquarters and other corporate offices – The Week

Cigarettes – At some point in the next few years cigarettes will contain such minuscule amounts of nicotine that smokers will not get their usual fix when lighting up.  The FDA said it would move toward slashing nicotine levels in an effort to reduce health effects of an addiction that claims 480,000 lives a year.  Studies have shown this will be a most effective way of kicking the habit – New York Times

Monkeypox – About 98% of cases worldwide are among men who have had sex with men.  Many of them have had multiple partners – New York Times

Home Buying – You might want to wait another year.  During the last significant recession, home prices dropped 10% locally and more than 20% across the nation – Steve Jolly, CEO of Greater Nashville Realtors

Lake Mead – which is the source of water for seven southwestern states is only 27% full.  Millions of people in the area are now at risk of seeing reduced access to both water and power.  Water levels in the nation’s largest reservoir have dropped 160 feet since July 2000 and 26 feet since July 2021 – USA TODAY

Series I Bonds - https://www.wsj.com/video/series/dion-rabouin/i-bonds-the-little-known-but-safe-high-return-investment/7E3F0770-73CA-4869-80FF-E25343C5A402

The material was prepared by MidSouth Investment Management LLC, and does not necessarily represent the views of the presenting party, nor their affiliates.  This information has been derived from sources believed to be accurate.  Please note – investing involves risk, and past performance is no guarantee of future results.  The publisher is not engaged in rendering legal, accounting or other professional services.  If assistance is needed, the reader is advised to engage the services of a competent professional.  This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.  This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such.  This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results.  Investments will fluctuate and when redeemed may be worth more or less than when originally invested.  All economic and performance data is historical and not indicative of future results.  Market indices discussed are unmanaged.  Investors cannot invest in unmanaged indices.