June 2023 Newsletter

One hundred dollar bills overlayed with stock market graphs.

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


The debt limit is the hottest topic in the financial world today. We expect at the last minute the House Republicans and the White House will reach a compromise. We find this method of government to be disgusting. If people in Washington, D.C. cannot negotiate and compromise, then they're in the wrong job. But we have the government we elected.

Economic indicators are basically going the wrong way. Right now, the stock market is only paying minimal attention. We're still optimistic about 2024 and 2025, but in the short-term almost everyone is predicting a recession.

In the short-term, we rate the stock market attractive for purchase on any weakness below the S&P 500 level of 3,700. But if we have no recession, we will not retest that S&P 500 level.

At this time, portfolios are 50% to 80% invested in the stock market and based on each investor’s objectives, risk tolerance, and timeframe. The rest remains in cash. For those who are tired of all this economic noise, we recommend dollar cost averaging back into the market over the next six to nine months.

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.


Quote of the Day

Warren is the 92-year-old Chairman and CEO of Berkshire Hathaway, in Omaha, Nebraska.

Warren Buffett


Warren is the 92-year-old Chairman and CEO of Berkshire Hathaway in Omaha, Nebraska.

Warren was asked at his 2023 Annual Shareholders meeting on May 6, 2023, “How should a person avoid major mistakes in business and life?”

Warren paused briefly and said, “You should write your obituary now and then try to figure out how to live up to it.”


Pop Quiz

A Credit Karma survey recently found what percent of Americans 59 and older have NO retirement savings?

The answer is at the bottom of the newsletter.


The Economy


Total U.S. nonfarm payroll employment rose by 253,000 in April while the official unemployment rate, U-3, dropped to a 54 year low of 3.4%. The February and March 2023 combined employment numbers were revised down by 149,000.

The Job Openings & Labor Turnover Survey (JOLTS) decreased to 9.6 million open jobs across the country as of the last business day in March. This compares to 9.9 million open jobs the month before. The chart below shows the recent drop in non-farm job openings. The other two variables have been removed from the chart for clarity.


2008 and 2023 seasonally adjusted job openings, hires, and separations levels


The seasonally adjusted Total U.S. Unemployment Rate, U-6, decreased in April to 6.6% vs 6.7% last month. There were only 5.1 million people unemployed in April, age 16 and older, compared to 6.0 million last month.

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


Seasonally adjusted unemployment rate from April 2021 to April 2023.



Unemployment Rates by Education Level, April 2023

Less Than High School Diploma5.4%
High School Graduate, No College3.9%
Some College or Associate's Degree2.9%
Bachelor's Degree or Higher1.9%







Average hourly earnings of all employees on private nonfarm payrolls were up 4.4% in April compared to a year ago. This compares to a 4.2% increase a year ago last month.

These employment numbers remain very strong. Unfortunately, it is unlikely inflation will significantly go down until the employment situation weakens.

Leading Economic Indicators (LEI)

The LEI for April continued its strong decline with another -0.6% decline. See the LEI performance in the blue line in the chart below.


The annual growth rate of the U.S. LEI continued to decline signaling weak GDP growth ahead.


With 13 consecutive monthly readings negative, the LEI continues to signal a recession in the near term. The Conference Board said, “The LEI continues to warn of an economic downturn this year.”

Gross Domestic Product (GDP)

The Bureau of Economic Analysis said the second estimate for GDP in the first quarter of 2023 was at an annual rate of +1.3%. That remains a significant drop from the previous quarter of +2.6%. The 1.3% increase was due to increases in consumer and federal government 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 GPD.

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



Annual inflation increased in April to 4.4% as measured by the Personal Consumption Expenditures (PCE) index. The previous month was 4.2%. Core PCE index—which excludes food and energy—disappointed everyone by increasing to 4.7% in April from 4.6% in March. What is going on? We're going the wrong way!

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 increasing, we can count on the Fed raising short-term interest rates again at their next meeting in mid-June.

See the chart below showing a brief history of core PCE inflation. Peak core PCE inflation this cycle was 5.3% in February 2022.

Percent change from the same month one year ago:

Price indexes for Personal Consumption Expenditures showing a percent change from month one year ago.


The Public Debt as Issued by the U.S. Treasury, May 24, 2023


Last month it was $31,712,000,000,000.


Important Dates in June

Man standing in front of a tank headed toward Tiananmen Square.

Tank-Man Stares Down Multiple Chinese Tanks just outside Tiananmen Square.


June 3 to 4 – On this night in 1989 in Tiananmen Square, Beijing, the Chinese military sent in tanks and heavily armored troops to disperse thousands of protesters. Hundreds were killed and thousands wounded. Many college students were arrested and sent to prison. The Chinese Communist Party termed the event as suppression of bourgeois liberalism.




A lioness hugging a man.

Does your lioness smile like this!



June 4 – National Hug Your Cat Day – until they smile!




June 5, 1968 – Robert Kennedy was assassinated in Los Angeles shortly after winning the California presidential primary. He died the next day.


An amphibious landing at D Day on June 6, 1944.

June 6, 1944 – D-Day was the largest amphibious invasion in military history.
“Operation Overlord”, as it was officially called, combined the forces of 156,000 U.S., British, and Canadian troops, 7,000 ships/landing craft, 2,400 aircraft, and 850 gliders. The 9,387 Americans buried at Omaha Beach have ensured Americans today continue to prosper as originally defined in our Declaration of Independence – “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”


June 13 & 14 – The fourth Federal Open Market Committee (FOMC) meeting of 2023.

June 14 – Flag Day. On this day in 1775, the Continental Congress united all the individual state military units under one command —the Continental Army. Flag Day is the birthday of the U.S. Army. Its first Commanding General was, of course, George Washington.

June 16 – Quad Witching Day when individual stock options, stock index options, stock index futures, and options on stock index futures all expire.

June 18 – Father’s Day

June 21 – The first day of summer—the summer solstice—the longest day of the year

June 30 to July 2, 1934 – Night of the Long Knives
Chancellor Adolf Hitler, urged on by Hermann Goring and Heinrich Himmler, ordered a series of political executions intended to consolidate Hitler’s power. At least 85 people died during the purge, but the actual death toll may have been in the hundreds with some estimated over 700.


The Stock Market


This month, we will hear from three Wall Street strategists.

Mike Wilson is the Chief U.S. Equity Strategist and Chief Investment Officer of Morgan Stanley in New York City.

Mike Wilson


Mike Wilson is the Chief U.S. Equity Strategist and Chief Investment Officer of Morgan Stanley in New York City.

Mike said on CNBC on May 15, 2023, “Our take remains the same, the market is speaking loudly under the surface with its classic late cycle leadership and extreme narrowness – it is bracing for further macro and earnings disappointment. However, we continue to possess a more bearish tactical view than most clients we have spoken with in terms of the downside risk given our earnings forecast which is now well below the buy side consensus.”

Marko is the Head of Quantitative Research at JP Morgan in New York City.

Marko Kolanovic


Marko is the Head of Quantitative Research at JP Morgan in New York City.

Marko has a Ph.D. in Theoretical Physics from New York University, but has switched his focus to financial markets.

Marko said on CNBC on May 15, “Bond prices are suggesting a recession is pending while stocks are pricing in a soft landing. They both cannot be right. We stay underweight equities given equities are pricing in a soft landing while the Fed’s interest rate hiking cycles are accompanied by tighter leaning standards which always end in a recession.”

And lastly, we're paraphrasing what Sebastien Page of T. Rowe Price said in mid-May 2023, we have the four horsemen of an economic recession running toward us. They are:

  • The Leading Economic Indicator index is now down for 13 consecutive months.
  • The yield curve has been inverted for 14 consecutive months.
  • Bank credit conditions are tightening as per the Senior Loan Officer Survey said 46% of banks
    are tightening loan conditions.
  • The Purchasing Manager’s Index is dropping.


Stock Market Valuation

Brian is the Chief Investment Strategist for BMO Capital Markets.

Brian Belski



Brian is the Chief Investment Strategist for BMO Capital Markets.

 S&P 500
per Share

The S&P 500 Index closed on May 23, 2023, at 4145.58.

Monthly Performance of the S&P 500 Index














Recommended Action for Your Stock Portfolio

There are so many indicators going in different directions at this time, it is nearly impossible to give a short-term accurate prediction of the stock market. Broadly, here are our comments:

1. The Fed continues to raise interest rates.
2. The Leading Economic Indicator has been negative for 12 months in a row.
3. The Yield Curve has been inverted for over a year.
4. Gross Domestic Production is inching down.
5. We've now had three large banks fail this year. And Credit Suisse in Switzerland makes four.
6. The Conference Board’s Consumer Confidence index fell significantly last month.

Everything says a recession is just around the corner, but that unpredictable stock market is not joining the fun by dropping significantly—at least not yet. It seems that every time the market goes down for 3 days in a row cash flows back in and the market goes up for 3 days in a row.

Our clients are currently 20% to 50% in cash. The last thing we want to do is miss the next upturn which we're predicting for 2024 and 2025. But if the stock market doesn’t drop because of a pending recession, then the upturn began in January this year.

For those with nearly unlimited patience, we recommend dollar cost averaging back into the market over the next six to nine months.


Financial Markets Vocabulary

What is market capitalization, or market cap?

The market cap of a stock is derived by multiplying the number of outstanding shares of that stock by the current price of a single share. For example, if a company has 50 million shares outstanding and a stock price of $100 per share, the market cap of that company is $5 billion.

OK, is that a large cap or small cap company? See the chart below.

Chart of large, mid, and small cap companies.


OK, Now What Do I Do?

Recently, Mark was under the care of a nurse’s assistant in a doctor’s office. She was young—perhaps 20 to 21 years old. Mark asked her, “Have you started saving for your retirement?” “No,” she answered, “I know I should have, but I just haven’t had the time to sign up.”

I explained that her generation would probably have an average life span of 105 to 110 years and that she will not want to live in retirement solely on Social Security for 40 to 45 years.

I then mentioned that the number one shortcoming of investors today—as determined by Investment Advisors—is people do not have enough of an emergency fund. I asked her, “Do you have an emergency fund?” “No,” she said, “I haven’t started that either.”

I suspect this was the first time she was being challenged about her financial planning. So OK, she is very young and it’s not yet the end of the world for her. I then thought how likely it was her parents never taught her the basics of personal finance. (Wow! Perhaps every state should mandate a class on personal finance to graduate high school!)

So, parents! No more excuses! Begin teaching your children about money today! Teach them how the number one financial rule is to spend less than they make. And, immediately after they get their first full-time job, to build up an emergency fund and begin retirement savings. Then, if their employer offers a retirement plan, they need to capture at least 100% of their employer’s match.

Then of course there are many lessons on debt and mortgages.


Our Financial Bad Boy This Month

Upside Down Mortgage Policy

Source: The Wall Street Journal, April 22-23, 2023, Page A16 & April 29-30, Page A12.

Income redistribution is a core value of the Biden Administration, and now it wants to spread that to mortgage lending. A new rule will raise mortgage fees for borrowers with good credit to subsidize higher-risk borrowers.

Under the rule—which went into effect May 1, 2023—home buyers with a good credit score of 680 or higher will pay $40 more each month on a $400,000 loan and upward depending on the size if the loan. Those who make a down payment of 20% on their new home will pay the highest fees. Those payments will then be used to subsidize higher-risk borrowers though lower fees.

According to calculations by Evercore ISI, buyers with a strong credit score between 720 and 739 who make 15% to 20% down payments will see their rates increase by 0.75%. Borrowers who put down 20 to 25% will see rates increase by 0.50%.

Well, what happened the last time lenders messed with the lending ecosystem? We endured The Great Recession of 2008 and 2009! The American Enterprise Institute looked at the default rates of Fannie/Freddie Mac mortgages with owner occupied homes with a 30-year fixed rate loan acquired in 2006-07 and found the following:

  • Borrowers with a credit score between 720 and 769 and 20% down payments, the default rate was between 4.2% and 8.8%.
  • Borrowers with a credit score between 620 and 639 with less than a 4% down payment, the default rate was 39.3% and 56.2%.

Doesn’t this new policy take us backwards?


The Bond Market


Of course, Congress and the President will eventually agree on cutting spending and increasing the debt limit. As soon as that happens, the Treasury will have to replenish their cash accounts and raise a boat load of money. Estimates are they will immediately issue $600 billion to $1 trillion in new debt. With all these bonds coming onto the market, the only way to find enough buyers will be for bond yields to go up. When that happens, bond prices go down. Therefore, ETF and bond mutual fund prices will very likely go down and yields on short term Treasuries
could exceed 5.5%.

Recommended Action for Your Bond Portfolio

This month our recommendations for an investor’s safe money has not changed.

  • Very Short-Term Investment-Grade bond funds
  • Short-Term U.S. Corporate or Securitized bond funds
  • 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 4.25% to 5.0% per year)

But in the next 30 days, our recommendation is to hold cash for an investor’s safest money.




Pop Quiz Answer

A Credit Karma survey recently found what percent of Americans 59 and older have NO retirement savings?

Answer: 27%

Why should everyone be saving for retirement? Two reasons. First, Social Security was never meant to care 100% for American seniors in retirement. When President Franklin D. Roosevelt signed the Social Security bill in 1935, he said, “This social security measure gives at least some protection to our retired citizens.”

Second, after ignoring the ravages of the worldwide pandemic, let’s realize we're all living longer. Today’s grade school children will likely have a lifespan of 105 to 110 years. Who wants to live 40 years or longer in retirement on just Social Security when the average monthly check in February 2023 was $1,694?