July 2023 Newsletter

U.S. bills with stock market graphics displayed over them.

Welcome to the July 2023 Newsletter. This month, we’re discussing the economy, employment, financial terminology, and more.


Broadly, investors have become optimistic about the U.S. stock market because consumers are spending freely, the labor market remains robust, the banking-sector crisis appears to have dissipated, and second quarter gross domestic product is expected to match first quarter’s unexpectedly good 2.0%.

We've changed our positioning in the stock market. Last month we said, “Our portfolios are 50% to 80% invested.” We're now 100% invested. For example, this means if you're a 70/30 investor with 70% in stocks and 30% in cash and fixed income, you're now back to your 70% stock market position. We continue to remain bullish (positive) about the stock market in the mid and long term, but in the very short term, almost anything can happen.

We recommend employees continue to save every pay period in their employer’s retirement plan and in a Roth IRA for their spouse and themself. Everyone should confirm they're at a minimum capturing 100% of any employer’s match. And, most importantly of all, everyone should be spending less than they make.


Quote of the Day

John D Rockefeller

John D. Rockefeller


“I believe in the supreme worth of the individual and in his right to life, liberty, and the pursuit of happiness. I believe:
          Every right implies a responsibility.
          Every opportunity, an obligation.
          Every possession, a duty.”

John Davison Rockefeller (1839 to 1937) was the founder of the Standard Oil Company. Rockefeller became one of the world’s wealthiest men and a major philanthropist. He was born into modest means in upstate New York. He entered the fledgling oil business in 1863. By 1880, he controlled 90% of the U.S. refineries and pipelines. By the mid 1890’s, Rockefeller retired and began a long process of giving his money away. He donated more than a half billion dollars to various educational, religious, and scientific causes. Rockefeller funded the establishment of the University of Chicago, and his wife founded the historical black woman’s college in Atlanta, Spelman College.


Pop Quiz

In the U.S. stock market, how many individual stocks, exchange traded funds, and mutual funds are there?

The answer is at the bottom of the newsletter.


The Economy


Total U.S. nonfarm payroll employment rose in May by 339,000 while the official unemployment rate, U-3, rose to 3.7%. The March 2023 and April 2023 combined employment numbers were revised up by 93,000.

The Job Openings & Labor Turnover Survey (JOLTS) edged up to 10.1 million open jobs across the country as of the last business day in April. This compares to 9.6 million open jobs the month before. The chart below shows the recent trend in open jobs.

Seasonally adjusted graphic showing April 2008 to April 2023 job openings, hires, and separations levels.

The seasonally adjusted Total U.S. Unemployment Rate, U-6, increased in May to 6.7% vs 6.6% last month. There were 5.7 million people unemployed in May—age 16 and older—compared to 5.1 million last month.

The following chart is based on the Bureau of Labor Statistics official unemployment rate, U-3.

Seasonally adjusted graph displaying May 2021 to May 2023 Unemployment Rate.


Unemployment Rates by Education Level, May 2023

Less Than High School Diploma5.7%
High School Graduate, No College3.9%
Some College or Associate's Degree3.2%
Bachelor's Degree or Higher2.1%







Average hourly earnings of all employees on private nonfarm payrolls were up 4.3% in May compared to a year ago. This compares to a 4.4% increase a year ago last month.

Leading Economic Indicators (LEI)

The LEI for May continued its strong decline with another -0.7% decline. See the LEI performance in the blue line in the chart below.

The annual growth rate of the U.S. LEI showing a negative growth.

With 14 consecutive monthly readings negative, the LEI continues to signal a recession in the near term. The Conference Board said, “The negative LEI readings continues to point to a weaker economy ahead.”

Gross Domestic Product (GDP)

The Bureau of Economic Analysis said the third and final estimate for GDP in the first quarter of 2023 rose at an annual rate of +2.0%. That was a significant increase over the previous estimate of 1.1%. The upward revision was due to increases in exports and consumer spending.

GDP results in 2022 were a decrease of 1.6% in the first quarter, a decrease of 0.6% in the second quarter, an increase of 3.2% in the third quarter, and an increase of 2.6% in the fourth quarter.

In the chart below, we see a disappointing downward trend in GDP over the preceding quarters.

Chart of the Real GDP from Q2 2019 to Q1 2023 displaying the Real GDP.



Annual inflation decreased in May to 3.8% as measured by the Personal Consumption Expenditures (PCE) index. The previous month was 4.3%. That was a significant and welcomed decrease. But the Core PCE index, which excludes food and energy, disappointed everyone by dropping only slightly to 4.6% in May from 4.7% in April.

The Core PCE index is the most favored inflation index by the Federal Reserve, so that is the one we watch the most. With Core PCE not going down in any significant way, we can count on the Fed raising short-term interest rates again at their next meeting in late July.

The Core PCE peak inflation this cycle was 5.3% in February 2022.


The Public Debt as Issued by the U.S. Treasury, June 28, 2023


Last month it was $31,803,000,000,000.


Important Dates in July

July 1, 2, and 3, 1863 – The Civil War battle in Gettysburg, Pennsylvania, was fought resulting in 51,100 men killed, wounded, or missing.

July 2, 1881 – James Garfield, the 20th President of the United States, was assassinated on this date at a Washington, DC train station. The shooting occurred less than four months into his term as president. He died on September 19. Charles Guiteau assassinated the President for an imagined political debt. Garfield was the second U.S. President to be assassinated in office. Chester Arthur was sworn in as President on September 19, 1881. Arthur did not win the Republican primary for President in 1884. The republican winner was James Blaine, but Blaine did not win the general election—the democrat—Grover Cleveland did.

July 4 – Independence Day.

July 4, 1776 – On this day 12 of the 13 original colonies approved Thomas Jefferson’s Declaration of Independence. The New York delegation abstained during the July 4 vote as they were waiting on approval from Albany. Yes, the American colonies were plagued even back then by leaderless bureaucrats.

On July 4, 1826, Thomas Jefferson, our 3rd U.S. President, died. Five hours later on the same day, John Adams, our 2nd U.S. President died.

July 14 – French National Day commemorates the Storming of the Bastille on 14 July 1789 and the unity of the French people. The national celebration includes large military parades, fireworks, and concerts.

July 20, 1969 – Neil A. Armstrong, commander of Apollo 11, became the first man to walk on the moon.

July 26 & 27 – The fifth Federal Open Market Committee (FOMC) meeting of 2023.


The Stock Market


This month we'll hear from Josh Brown, CEO of Ritholtz Wealth Management, in New York.

Josh Brown, CEO of Ritholtz Wealth Management, in New York

Josh Brown

Brown said on CNBC on June 15, “We have now started a catch-up trade scenario in the stock market. I totally disagree with Bank of America when they said today, ‘Money is waiting for economic clarity before shifting into cyclicals’.”

“The (stock) market has made a decision! The market is not waiting for clarity – the market is and has moved! Stock prices are moving in advance of what people have started to sense – that the economic upturn is nearly upon us and it’s time to buy stocks.”


Stock Market Valuation

Brian is the Chief Investment Strategist for BMO Capital Markets.

Brian Belski


Belski is the Chief Investment Strategist for BMO Capital Markets.

Belski said on June 7 on CNBC, “We feel the market bottom was in October 2022. We have now raised our 2023 base case for the S&P 500 Index. Our previous number was 4,300 and now it is 4,550. Our bull case for the S&P 500 Index is to reach 5,050 during 2024.”

David Kostin is the Goldman Sachs Chief U.S. Equity Strategist based in New York.

David Kostin

David Kostin is the Goldman Sachs Chief U.S. Equity Strategist based in New York.

Kostin published a brief note on June 21, 2023. It was reported on CNBC the same day. In it, Kostin said, “Our baseline view is the S&P 500 Index will rise 3% to 4500 by year end 2023 and will rise to 4,700 (+7%) in 12 months.


The S&P 500 Index closed on June 28, 2023, at 4376.86


Monthly Performance of the S&P 500 Index



Recommended Action for Your Stock Portfolio

For investors with excess cash reserves, we believe it is time to get back into the stock market. We're focused on the following sectors of the S&P 500 Index:

  • Technology
  • Energy
  • Materials
  • Industrials
  • Consumer Discretionary
  • Health Care
  • Financials

We are not invested right now in:

  • Real Estate
  • Communication Services
  • Consumer Staples
  • Utilities

We say to investors who are already fully invested in the stock market:

  • Spend less than you make and invest the difference.
  • Resist the desire to possess everything right now. Embrace delayed gratification.
  • Stay focused on being a long-term investor.
  • Resist the temptation to jump in and out of the market.
  • Use your patience to see your investments grow over a multi-year period.
  • Use your courage to ride out any short-term market dips.

So, it’s possible that an economic or other type of event will take place that drives the stock market down. We cannot control or predict the short term. But if this does happen, we encourage everyone to ride out any short-term declines in the market as we're optimistic over the mid and long-term.


Financial Markets Vocabulary

Last month we defined “market cap” of companies and how the size of a company’s market cap places the company in the categories of Large Cap, Mid Cap, or Small Cap.

So how does an investor invest in each category? In its simplest form, the easiest way to invest in large cap stocks is to invest in an exchange traded fund that follows the S&P 500 Index. Approximately 70% of an investor’s stock market exposure should be in the large cap category. Here are two options:


Exchange Traded Fund SymbolAnnual Expense Ratio


Twenty percent of an investor’s stock market exposure should be in mid-caps. To invest in mid cap funds, we use the following:

Exchange Traded Fund SymbolAnnual Expense Ratio
VO (that is V-oh)0.04%


Ten percent of an investor’s stock market exposure should be in small caps. To invest in small cap funds, we use the following:

Exchange Traded Fund SymbolAnnual Expense Ratio


To make things very easy, use VTI. VTI invests in all three categories – large, mid, and small cap.

Exchange Traded Fund SymbolAnnual Expense Ratio



OK, Now What Do I Do?

Readers of this newsletter are at least somewhat interested in monitoring their investments. So, what if you want to learn more? Where do you go?

Below we have listed our three favorite books on investing.

John C. Bogle’s Common Sense on Mutual Funds
Burton G. Malkiel’s A Random Walk Down Wall Street

Even the most casual observer of the financial services industry has noted there are many terms to learn. Sometimes, you just need a financial dictionary. Well, here is the best one:

David L. Scott’s Wall Street Words

This just might be the best of home schooling!


Update - Our Financial Bad Boy This Month

Governments That Are Owed Taxes Can’t Seize More Than They Are Due

Source: The Wall Street Journal, digital version, May 25, 2023.

In our May 2023 newsletter, we reported on the case of Ms. Tyler of Minneapolis, Minnesota, having her condo sold by the county for $40,000 to settle her debt of $15,000 of back taxes and penalties. But the Hennepin County (Minneapolis area) kept the whole $40,000! Ms. Tyler’s case was at that point in front of the Supreme Court. We stated in our newsletter, we hoped for a 9-0 vote in favor of Ms. Tyler.

Well, that is exactly what happened! The Supreme Court quickly ruled unanimously on May 25, 2023, that government agencies that seize private property to satisfy delinquent taxes can’t keep the surplus if the property sells for more than what the taxpayer owes.

“The taxpayer must render unto Caesar what is Caesar’s, but no more,” Chief Justice Roberts wrote to the chagrin of the Hennepin County Auditor, Dan Rogan. Rogan gave a feeble reply saying, “We were just administrating state law.” Yeah, Dan, you too are a victim.

We now expect all 12 states and the District of Columbia that allow “home equity theft” to immediately add a little decency to their laws and no longer allow a taxing authority to steal money from property owners.

Tax Update For High Income Earners

Investment Tax Hits More Americans

Source: The Wall Street Journal, – page B2, June 24-25, 2023.

This relatively new tax is called the Net Investment Income Tax or NIIT for short. It’s a 3.8% surtax on a filer’s income applied to sources like interest, dividends, royalties, and capital gains. It only applies to investment income in excess of the trigger points. Those triggers are based on a filer’s Adjusted Gross Income (AGI). This tax is initiated when AGI is above $200,000 for single filers or $250,000 for married couples. As these limits are not adjusted for inflation, more than twice as many Americans are paying this tax today as compared to 2013.

Wages, pensions, Social Security payments, and taxable retirement plan payouts aren’t subject to this surtax, but they are used to determine if a taxpayer is over the trigger points. For example, Lee and Dana are a retired couple. Their combined income of pensions, wages, and Social Security is $245,000 – only $5,000 below the AGI trigger point. But they also have $15,000 of interest from bonds and CDs. Therefore, the first $5,000 of the $15,000 of interest is not hit with the 3.8% tax, but the remaining $10,000 is. Consequently, they owe an additional $380 of net investment income tax.


The Bond Market


The Federal Reserve recently completed their 2023 Bank Stress Test of the 23 largest banks in the world that participate in the U.S. financial markets. Each year the Stress Test includes slightly different criteria of financial conditions. For 2023, the notable updates were:

  • a detailed description of international loan losses
  • an increase in risk sensitivity of commercial real estate losses
  • for banks participating in investment trading, “trading net revenue” was better defined
  • bank holding companies will be modeled individually with their own net revenue

Results show theses banks have sufficient capital to absorb more than $540 billion in predicted losses and can continue lending to household and business under the pre-determined economic stress condition.

Recommended Action for Your Safe Money

This month our recommendations for an investor’s “safest money” have not changed.

  • Short-Term U.S. Corporate or Securitized bond funds
  • Bank or Credit Union Certificates of Deposit (only if FDIC or NCUA insured!)
  • U.S. Savings I-Bonds (max savings is $10,000 per account per year)
  • Cash (in a money market mutual fund paying 4.5% to 5.0% per year)



Pop Quiz Answer

In the U.S. stock market, how many individual stocks, exchange traded funds, and mutual funds are there?



Stocks on the New York Stock Exchange2,400
Stocks on the NASDAQ exchange3,300
Stocks traded Over the Counter10,000
Exchange Traded Funds3,100
Mutual Funds7,500

Does this make investing easier or more challenging?