Lorraine’s August Update
September 1, 2023
Hello Friends,
As summer winds down, so too does the volume in my home. Grace left a month ago for Louisiana to start her third year in college and Liam just left a week ago for his second year at Beloit College. Mick, Nellie and I have returned to our regular routine. My ‘I am only here for the halftime show’ t-shirt is ready for the York football season as Mick takes the field with the marching band for his senior year. It is hard for me to imagine that in just one year, this nest will be empty! Kelly has planned several outings during September so she will be abandon….I mean….taking some well-deserved time off. If you reach out to her and get her ‘out of office’ don’t fret, I can handle things without her (translation: find someone qualified to handle your requests). Now, to the markets:
- The Federal Reserve Chairman’s speech at Jackson Hole was not earth shattering. He continues to talk tough on inflation and is willing to keep rates at these levels or even raise rates further, as needed. He acknowledged that inflation has certainly moved down from the peak, but not far enough for his liking – 2% annual inflation is the objective.
- The recent JOLTS (Job openings and labor turnover summary)* report, however, should hearten the Fed a little and confirm that their attempt to rein in the economy is working. The report showed a significant dip in job openings in July (down to 8.8 million) and June numbers were also revised downwards. I am often asked why reports like this are welcomed by the markets. It seems counterintuitive that the market would like a weaker job market. The thought process goes like this: in an inflationary environment, if the labor market is tight (more jobs than workers) it gives bargaining power to workers to ask for higher wages. Higher wages mean margins are compressed, and costs for consumers therefore have to increase. In addition, if wages are rising, demand for goods and services also rises as consumers (workers) seek to spend their disposable income. When demand rises, producers, in an attempt to meet that demand, hire more people and will charge more for their goods and services….and so on and so forth until we end up in a wage/price spiral. When the JOLTS report shows a softening in the demand for workers, it means the recent interest rate increases are working and the economy is contracting, meaning demand and price increases should slow down, which in turn means that interest rate increases can stop or pivot to interest rate cuts….which the market likes! Yes, I know it seems like good news is bad news and bad news is good news, but I don’t make the rules.
- The real balancing act is trying to slow down the economy enough to temper labor demand while avoiding mass layoffs AND stabilizing pricing (a soft landing). A more likely scenario is the restrictive monetary policy pushes a little too far and the economy over contracts (recession). With an 18 month lag in interest rate effect, we are feeling our way through this process right now, but recession indicators (like an inverted yield curve) continue to signal there is more pain to come.
- We are focused on locking in current yields for our income investors and are looking more and more at the alternative space to offer returns outside of the imbalanced equity markets.
As many of you know my daughter Grace interned with us this summer. As a parting assignment, I asked her to write a brief summary of her time with the team (see below). I am a little salty at the fact that a clear favorite emerged in her recap and it was not her mother! It’s a bitter pill, but one I will swallow only because I happen to know Ryan’s son Charlie is a big fan of mine as evidenced by his presentation to me of a juice box on my last visit….so I guess we are even!
This summer, I had the opportunity to work with and learn from the Hummer Mower Associates team, and to say I was excited would be an understatement. Ever since I was a little girl, I knew I wanted to be a ‘businesswoman’ (even before I knew what that really was), just like my mother Lorraine. Being able to be in the office at only twenty years old and have a function more than organizing paperwork was something I had only dreamt about before this summer.
From workplace banter to using excel, every moment spent in the office was constructive to my learning about and acclimatization to the environment at HMA. In speaking with my uncle and other adults in my life, they all advised me to take this time to be a sponge, to soak up every ounce of information I could, to write things down and mostly, to ask questions. I was told to make the most of it, so that’s what I did.
I worked with most of the partners for at least a day trying to learn what they do and what they know. I was able to sit in on client meetings to see how they conduct the client facing side of their business, and I watched them change the way they do their job for each person. This industry is ever-changing and every single person is going to have a different way they want their money handled. I was able to watch each advisor make their client comfortable, make their client understand what approach they advised would be best for their portfolio, and make their client laugh. It is incredible to see the way HMA tailors their work to each individual person, and that is something I feel is often lost at larger firms.
I have also never met more well researched people in my life. Ryan spent a whole day showing me how he stays so well informed on stock performance and how he researches for possible opportunities for client’s portfolios. If you think you read the news in the morning, you should call Ryan, Jonathan, or Lorraine and they will give you a run for your money – I am sure.
Before this internship, I never knew how much work goes into a yearly call with a client, or how many people and different ideas it takes to build a portfolio, or how much time it takes to keep data streamlined and efficient to access, or even how something as simple as a calendar or group call takes real time and planning. Each member of this team has a very specific and necessary function, and I am beyond excited to make my place here. I am so grateful to have spent my summer learning from the best team that was so eager to teach me and challenge me. I am looking forward to my future at HMA.
