March 2022 Newsletter

Welcome to the March 2022 Newsletter. This month, we’re discussing the economy, employment, financial terminology, and more.


It’s hard to say whether we’re in the middle or end of the current stock market correction. From the market peak on January 3 to the trough on February 27, the downturn has been 11.9% as measured by the S&P 500 Index closing numbers.

We continue to anticipate choppy and erratic market activity during the first half of 2022 as investors come to grips with the new monetary tightening policies and the unstable geopolitical reality in Eastern Europe. Our portfolios are fully invested, and we’re comfortable with dollar-cost averaging into periods of market weakness.


Quote of the Day

William Penn Adair Rogers was an American vaudeville performer, actor, humorous and social commentator.

“Too many people spend money they’ve earned…to buy things they don’t want…to impress people they don’t like.”
Will Rogers

William Penn Adair Rogers was an American vaudeville performer, actor, humorous and social commentator.  He was born as a citizen of the Cherokee Nation and is known as “Oklahoma’s Favorite Son”.






Pop Quiz

How easy is it for an investor to put money into a stock index such as the S&P 500 Index?

          Easy             Moderate               Hard            Impossible


The answer is at the bottom of the newsletter.


The Economy

Financial advisor studying the current economy.



Total U.S. nonfarm payroll employment rose substantially in January by 467,000 while the official unemployment rate, U-3, increased slightly to 4.0% from last month’s 3.9%. Equally meaningful November and December 2021 employment numbers were significantly revised upward by a total of 709,000.

The Job Openings & Labor Turnover Survey (JOLTS) said there were 10.9 million open jobs in the U.S. as of the last business day of December – compared to 10.6 million openings the last day of November.

The seasonally adjusted, Total U.S. Unemployment Rate, U-6, declined in December to 7.1% from 7.3% last month. It was 11.1% in January 2021. There are 7.2 million people unemployed in the U.S., age 16 and older, compared to 6.0 million last month. As the economy gets better, more people who were not looking for a job, are now looking.

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



See the section below on Financial Markets Vocabulary for definitions of U-3 and U-6.


Unemployment Rates by Education Level, January 2022

Less Than High School Diploma6.3%
High School Graduate, No College4.6%
Some College or Associate’s Degree3.6%
Bachelor’s Degree or Higher2.3%

Average hourly earnings of all employees on private nonfarm payrolls were up 5.7% compared to a year ago.



Gross Domestic Product (GDP)

The Bureau of Economic Analysis said the second estimate for the 2021 fourth quarter GDP increased by 7.0% compared to 2.3% in the third quarter and 6.7% in the second quarter last year.


A graph of the real GDP from 2018 to 2021.

The increase in real GDP reflects increases in inventory, exports, personal consumption expenditure and nonresidential fixed investment.




Annual inflation rose 6.1% in January as measured by the Personal Consumption Expenditures (PCE) index. The core PCE index, which excludes food and energy, rose 5.2% in January, as compared to the adjusted 4.9% in December.

The nationwide median price of an existing home sold in January 2022 was 15.4 % higher on average than January 2021 according to the National Association of Realtors. The median price was $350,300.

Long-term inflation expectations can be estimated by measuring the differences between Treasury bond yields & TIPS real yields of the same maturities.  Results are:

Bond MaturitiesAnnual Inflation Expectations
5 Year3.11%
10 Year2.62%
30 Year2.28%

This month’s estimated annual inflation numbers above are 17 basis points higher on average compared to last month.



Important Dates in March

Calendar displaying March 2022.



March 8 – International Women’s Day

March 15 – The Ides of March.  This is the day Julius Caesar, leader of the Roman Republic, was stabbed to death in the Roman Senate in 44 BC, and the Roman Empire began.

March 15 & 16 – The second Federal Open Market Committee meeting of 2022.

March 17 – St. Patrick’s Day observes the death of St. Patrick, the Patron Saint of Ireland.

March 20 – The First Day of Spring or the Spring’s Equinox for the northern hemisphere. An equinox is the time when the plane of the earth’s equator passes through the center of the Sun. The earth has two equinoxes: typically, March 20 and September 22.

March 25 – Medal of Honor Day

March 29 – National Vietnam War Veteran’s Day



Stock Market

The New York Stock Exchange Building



David Kostin, Goldman Sachs Chief U.S. Equity Strategist

David Kostin

On February 8, David Kostin, Goldman Sachs Chief U.S. Equity Strategist, was asked on CNBC, “Do stock prices need to drop?”

David said, “Part of this discussion includes: 1) tightening of the money supply and interest rate increases by the Federal Reserve, and 2) higher bond yields. This potentially leads to lower stock prices. Or, we could say, higher corporate earnings are necessary to lift stock prices.

“This will lead to a bifurcation in the stock market. What we have seen so far during fourth-quarter earnings are companies that have missed expectations {Peloton, Meta (Facebook), Zoom, and PayPal} have been severely punished in their share prices.

“Then there are companies that have beaten expectations with their fourth-quarter earnings, but some have lowered their profit guidance for 2022. The idea of tightening financial conditions puts additional importance on a company’s future earnings to enable the company’s stock price to grow.

“Even so, our published target for the S&P 500 Index at year end is still 5,100.”

Lorenz Financial’s conclusion for the 2022 stock market is, as corrections do not end bull markets, eventually this year we will set a new all-time closing high because:

– The Federal Open Market Committee will increase short-term interest rates this year, but not aggressively.

– Inflation will moderate from its current high level.

– We will have 3% to 4% GDP growth this year.

– The supply chain log jam will unwind during the year.

– The consumer is strong and continues to spend money.

–  Jobs are plentiful and wages are going up.

– There is a large amount of cash on the sidelines waiting to buy into the stock market.



Stock Market Valuations

There are two areas of the U.S. financial markets that continue to be overpriced – bonds and stocks of companies that have never made a profit. Stay 100% away from these two areas.

We believe the stock market in 2022 will be okay with increased volatility as compared to last year. We believe the current stock market correction will end, and an all-time new high will be established later this year.


YearEarnings/SharePE RatioApprox. S&P 500 Index High


The current market all-time closing high was 4,796.56 on January 3, 2022. If we reach 5,060 this year, that is 5.5% gain over the January 3 all-time high.

In our January newsletter, we said, “During 2022, it is possible we will have a stock market correction where the S&P 500 Index PE ratio temporarily drops to 17 or 18 and the S&P 500 Index drops to 4,200.” On February 23, we had a closing low of 4,225.50.



Recent Monthly Performance of the S&P 500 Index













Recommended Action for Your Stock Portfolio

What investments does Lorenz Financial recommend for 2022? Ever since the end of the Dot Com bubble in 2003, growth stocks have been the place to be. But now, it appears things have changed. It looks as if value stocks are more in favor. We’ll repeat the three value investments we listed last month:

  • Schwab US Dividend Equity (SCHD)
  • Berkshire Hathaway (BRK-B)
  • Oakmark Fund (OAKMX)

All three are an excellent large-cap “value” pick. FYI, the VanEck Vectors Russia ETF has dropped from its 52-week high of $33.39 to its closing price on March 1 of $8.26. That’s down 75%. Ouch!

All portfolios remain fully invested. Additional money can be added to an investor’s stock portfolio on a dollar-cost-average basis. Our expectation is this will be a difficult year in which to secure significant stock market gains.




    Financial advisors analyzing the finances of clients.


    This month, we want to clarify the various definitions of unemployment as calculated and published monthly by the Department of Labor. There are six unemployment numbers. Those designations and their January 2022 unemployment rates are:







    In this newsletter, we explain two of the six unemployment numbers. Their definitions are:

    • U-3 Total unemployed, as a percent of the civilian labor force. This is the government’s official unemployment rate and is the number broadcast by all news outlets.

    • U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time who want a full-time job, as a percent of the civilian labor force. “Persons marginally attached to the labor force” are those who currently are neither working nor looking for work but indicate they want and are available for a job and have looked for work sometime in the past 12 months.

    We would like the U-6 unemployment number to be more publicized as it represents everyone who wants a full-time job but doesn’t have one.



    OK, Now What Do I Do? 

      Last month we emphasized, “download your Social Security 2-page statement” so you can accurately add Social Security income to your retirement planning. We also emphasized reading John Bogle’s book, Common Sense on Mutual Funds.

      A highly respected financial advisor, Dave Ramsey, has a strong distaste for credit cards and FICO Scores. But for most Americans, our FICO Scores impact our financial lives. So here are some FICO facts. Scores range from a minimum of 300 to a maximum of 850. The higher the score the better. People with a high score will qualify for more loans and be offered lower interest rates. Here is how the American population rank in percent vs FICO Scores:

      A graph explaining FICO scores and population rank in percent.


      What are FICO Scores calculated on?

      • 35% on payment history (Never be late making a payment!)

      • 30% on amounts owed (Do not max out a credit card! Keep balances at or below 25% of the max.)

      • 15% on length of credit (Don’t flip flop loans between banks or credit card companies.)

      • 10% on credit mix (It’s good to show a borrower can manage both installment accounts [mortgages] and revolving accounts [credit cards]). But keep in mind this is only 10%.

      • 10% on new credit (It’s OK to open a new line of credit, but don’t open 3-4 new accounts the same year. And again, this is only 10%).




      Our Corporate Bad Boy This Month

          The National Restaurant Association of the U.S. Congress

            Source: The Balance of Small Business


              Another pop quiz: What is the federal minimum wage for tipped workers?

              Answer: $2.13 per hour plus tips.

              Mark finds this astonishing! The law does say, if the total income of a restaurant server does not reach the Federal minimum wage of $7.25 per hour, the restaurant must make up the difference.

              This minimum wage of $7.25 an hour has not changed since 2009. Why not? One reason is some Republicans prefer to raise the minimum wage and then tie it to inflation. But if this were put into law, Democrats would lose an annual campaign issue. Some Democrats want the minimum wage increased but not tied to inflation.

              The National Restaurant Association claims that damage will be done to the economy due to job losses and prices will be increased for consumers if the minimum wage for tipped workers is increased. A good question might be, how many National Restaurant Association employees have ever worked for $2.13 per hour?

              A recommendation to consider, please tip restaurant servers generously.



                  Bond Market

                      Financial advisor assessing bonds.


                            The U.S. Treasury yield curve has flattened in recent months as short-term rates have moved up faster than longer-term rates. The Atlanta Fed now predicts first quarter GDP will only be 1.3%. Our prediction for the calendar year 2022 GDP is 3-4%.

                            In summary, real GDP growth this year will be higher than the lackluster 2% we have seen the last 10 years. But with a minimal growth in our population, 2% is likely where we are headed long-term. Very low unemployment is a bright spot as are corporate profits, and the expectation that inflation and supply chain bottlenecks will both unwind during the year.


                                Federal Reserve

                                  The next Federal Open Market Committee (FOMC) is March 15 and 16. We expect the FOMC will raise the federal funds rate 25 basis points (0.25%) at this meeting. Additional increases in the federal funds rate is expected during 2022. This is the primary method the Fed will use to implement Quantitative Tightening.

                                  The second method used by the FOMC is to reduce the size of its $8.4 balance sheet. The Fed has shared its approach to do this:

                                  – The federal funds rate will be the primary means of adjusting monetary policy.

                                  – Reducing the balance sheet size will commence after rate hikes have begun.

                                  – Reductions in balance sheet holdings will occur over time in a predictable manner.

                                  – The FOMC intends to primarily hold Treasury securities and minimize mortgage-backed securities.

                                  The Fed has said, “they will avoid taking Quantitative Tightening steps that would jeopardize the ongoing economic recovery as the nation emerges from the pandemic.”

                                        Treasury Securities

                                          The yield curve continues to flatten as shorter-term rates are moving up faster than longer-term rates.

                                          Congress passed another short-term spending bill that funds the federal government through March 11. Negotiations to pass a budget through the end of the current fiscal year are underway. The budget deficit was $259 billion through the first four months of the fiscal year. In the same periods, the 2020 deficit was $389 billion, and $736 billion in 2021.



                                            Recommended Action for Your Bond Portfolio

                                              There have been no bond fund changes to our recommendations this month. Most bonds are not appropriate today because it is expected in the short to mid-term, interest rates will rise above today’s levels. As bond yields increase, existing bond prices decline. Our bond market recommendations only include:


                                              • Ultra-Short-Term U.S. bond funds
                                              • U.S. Savings I Bonds
                                              • Cash


                                              The most important aspect in selecting a bond fund in this market is to keep the bond fund’s average duration low. Lorenz Financial suggests keeping a bond fund’s duration around one year. The higher the bond fund’s duration, the faster the fund’s price will decline as interest rates rise.



                                                Before Investing

                                                Of course, everyone should maintain a safe and liquid emergency fund of at least 6 to 9 months of family expenses in an FDIC insured bank or an NCUA insured credit union. An emergency fund should be kept in a checking account, savings account, or money market account – it should not be “invested or tied up in any way”. Every family should have an adequate, safe, and liquid emergency fund before investing in a stock and bond portfolio.

                                                    PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.

                                                        Pop Quiz Answer

                                                          How easy is it for an investor to put money into a stock index such as the S&P 500 Index?

                                                                    Easy             Moderate               Hard            Impossible

                                                          Answer:  Impossible

                                                          Money cannot be directly invested in a stock (or any) index. But investors can put money into a mutual fund or exchange-traded fund that imitates the index. In theory, an index fund’s performance will be equal to the performance of the index minus the fees of the fund.

                                                          Example, an investor can not put money into the S&P 500 Index, but an investor can put money into ticker symbol, VOO. This is Vanguard’s exchange-traded fund that mirrors the performance of the S&P 500 Index.